We finally found the Fact Sheet for Phase 2 of the Emergency Relief Program. It has answered some of our questions. Also, if any farmer needs help on Phase 2 of the Emergency Relief Program, I will be providing that service. My bill to review your operation to determine if you qualify will be $750 and if you need me to help prepare the application, the bill would be an extra $1,500. If you are interested, please email me at farmcpa@outlook.com.
The application appears to be based solely on Schedule F information (or equivalent) for a calendar or fiscal year. This means that only the income that is reported on that form will be picked up as Allowable Gross Revenue (AGR) when filling out Form FSA-521 (we still can’t find this form yet). You will need to review your Schedule F for each year to determine the best benchmark year to use, either 2018 or 2019.
Page 4 and 5 of the Fact Sheet lists the lines off of Schedule F and whether that income is allowed or excluded. Let’s review each of those line items:
Line 1C is the net income from purchasing crops or livestock for resale. The only income allowed from this line is crop income that has changed due to growth. Example is purchasing a plant that is 2 inches and growing it to 14 inches.
Line 2 - Sales of livestock, produce, grains, etc. Here is some of the key income that is not allowed:
Eggs
Milk
Revenue from animals for show, sport, or recreational purposes
Revenue from raised breeding stock either reported on Form 4797 or Schedule F
Sales of ag products resulting from value added reported on Schedule C or equivalent. An example would be a winery that has grape sales reported on Schedule F and wine sales reported on Schedule C.
Line 3A - Cooperative Distributions. We got our answer on this income. You essentially only report per-unit allocations for sales to the cooperative. It appears you do not report any patronage dividends since that was income earned by the cooperative and not derived by activities of the farmer.
Line 4A - Agricultural Program Payments. The Fact Sheet lists the payments that are included in AGR and ones that are not. Key payments not required to be part of AGR are CFAP1, CFAP2, Pandemic Livestock Indemnity Program (PLIP) and Spot Market Hog Pandemic Program (SMHPP) payments. This will likely help farmers since most of these payments are included in the disaster year not the benchmark year.
Line 5A-5C - CCC Loans. You will include this as part of AGR if these proceeds are reported on these lines.
Line 6 - Crop Insurance Proceeds. You will include most crop insurance and equivalent payments as part of AGR. However, many of the USDA programs such as ELAP, LFP, LIP, QLA, etc. will excluded from AGR. This may or may not be helpful to farmers. For example, assume a farmer received $1 million of crop insurance in 2018 but elected to defer the income to 2019 where the farmer also received $1 million of crop insurance proceeds that was not deferred. This may result in the farmer showing a very high benchmark AGR which is good.
Line 7 - Custom Hire Income is not included as part of AGR.
Line 8 - Other Income. Most of this income will not be part of AGR including hedging gains or losses. As we mentioned in previous posts, this may help or hurt the farmer in their application. The only income that might be included is commodity specific income from a state or local government or other crop related income not shown on any other line.
Producers with eligible revenue losses in both disaster years will utilize the following procedures:
Both disaster years will be on the same application,
The same benchmark year may be used for both disaster years,
Participants cannot use the same tax year for more than one disaster year. This is likely related to entities with fiscal year-ends such as a corporation with a June 30 year-end. An entity with a June 30, 2021, year-end will have both 2020 and 2021 AGR. If the farmer picks June 30, 2021, for its 2020 disaster year, it must then pick June 30, 2022, for the 2021 disaster year (at least that is my reading of the fact sheet), and
Disaster year revenue must consist of consecutive years.
It appears that adjustments can be made if the farm size materially changed between the benchmark and disaster years. Still not exactly sure how this will be calculated but assume it may be based on some type of per acre AGR calculation. For example, assume a farmer farms 2,000 acres in 2018 and 2019, but then farms 4,000 acres in 2020 and 2021. Their benchmark AGR per acre is $1,000 times 70% is $700. Their disaster year AGR is $500 per acre. They would qualify for $200 per acre times 4,000 acres or $800,000 subject to the overall payment limit.
We will keep you posted.
