How Should Crop Insurance Deferral Be Reported for ERP and PARP?

As you can see, the reporting of these proceeds can be material to the calculations. The same issue applies to PARP.
As you can see, the reporting of these proceeds can be material to the calculations. The same issue applies to PARP.
(Farm Journal)

FSA issued new FAQs on January 23, 2022 regarding the Emergency Relief Program (ERP) Phase 2 and many of the FAQs answers some of our questions, there is one dealing with crop insurance deferral that actually creates more questions than it answers.

Farmers who receive crop insurance for yield losses have an option to elect to report that income in the next year. Many farmers take advantage of this, and it appears that FSA tried to address how to report this revenue for ERP Phase 2 and PARP as follows:

Q. How will deferred revenue and crop insurance proceeds be addressed? 

A. Revenue is based on tax year and is specific to each applicant.  The revenue would go with the applicable tax year the applicant would have reported for tax purposes. ERP Phase 2 is a producer certification-based program, specific questions on revenue reporting should be addressed with the producer’s individual tax preparer.  FSA cannot provide casual advice for how income could or should have been reported.  The FSA-521 table contains what is considered allowable gross revenue.

I have bolded the section that needs to be clarified. Crop insurance proceeds received in any applicable tax year is then reported on line 6a of Schedule F. However, actual taxable crop insurance proceeds for the year are reported on line 6b and then any deferred from the previous year are reported on line 6c.

Bottom Line

It appears that the FAQ indicates you report crop insurance proceeds based on line 6b plus 6c, however, it is our opinion line 6a is likely the correct amount of crop insurance proceeds to be reported. When determining adjusted gross income (AGI) for the $900,000 annual AGI limit, we use line 6b plus 6c. Is FSA suggesting we use the same or use line 6a.

We need better clarity on this before calculating allowable gross revenue (AGR). Here is an example:

Sue has benchmark revenue of $2 million for 2018 and 2019. In 2020, she has crop revenue of $1 million and received $700,000 of crop insurance proceeds which she elected to defer to 2021. 70% of $2 million is $1.4 million and if Sue does not include the $700,000 of crop insurance proceeds in 2020 as part of AGR, she will qualify for up to $400,000 of ERP Phase 2 (before any payment limits). However, if AGR is based on crop insurance proceeds received during 2020 reported on line 6a, she would qualify for no ERP Phase 2 payments.

As you can see, the reporting of these proceeds can be material to the calculations. The same issue applies to PARP. We will keep you posted.

 

Latest News

Oil Testing Offers Value: Like a Blood Test for Tractors and Combines
Oil Testing Offers Value: Like a Blood Test for Tractors and Combines

Oil and fluid testing answers both short- and long-term questions about the internal condition of engines, transmissions and hydraulic systems.

Airplane
Still Waiting on SAF Announcement

While the White House aims to boost production of SAF, it has faced challenges in defining rules for tax credits, particularly for crop-based forms of the fuel.

Corn Prices Higher After USDA's Bullish Reports, Soybeans Flat: Where Do the Markets go Now?
Corn Prices Higher After USDA's Bullish Reports, Soybeans Flat: Where Do the Markets go Now?

Grains end mixed with strong gains in corn in reaction to USDA's 90 million acre estimate and lower than expected stocks. But how much higher can corn go? Garrett Toay, AgTraderTalk, shares his thoughts.

Where Did All the Corn Acres and Principal Crop Acres Go? The Two Biggest Questions from USDA's Big Prospective Plantings Report
Where Did All the Corn Acres and Principal Crop Acres Go? The Two Biggest Questions from USDA's Big Prospective Plantings Report

USDA says farmers intend to plant 90 million acres of corn this year, which is lower than the trade expected prior to USDA's big Prospective Plantings report.

USDA Shocks the Markets with 90 Million Corn Acre Estimate:  Where do Corn and Soybean Prices Go From Here?
USDA Shocks the Markets with 90 Million Corn Acre Estimate: Where do Corn and Soybean Prices Go From Here?

USDA provides bullish reports for corn, but neutral to bearish for soybeans and wheat. Brian Splitt, AgMarket.Net, has details.

APHIS Now Thinks Wild Birds Are to Blame for Highly Pathogenic Avian Influenza's Arrival on Four U.S. Dairies
APHIS Now Thinks Wild Birds Are to Blame for Highly Pathogenic Avian Influenza's Arrival on Four U.S. Dairies

The livestock industry continues to grapple with the first confirmed cases of HPAI in cattle, while federal and state agencies continue to assure consumers there's no concern about the safety of the U.S. milk supply.