Senators Chuck Grassley (R-IA) and Sherrod Brown (D-Ohio) just introduced the Farm Program Integrity Act of 2023. The act, if passed, would elicit the following changes:
The maximum payment limit for most ag programs would be $125,000 per person and a farm would have a maximum limit of $250,000.
Marketing loan gains and loan deficiency payments would have a cap of $70,000.
General partnerships and qualified joint ventures would now be treated just like corporations or other limited liability entities. This means a general partnership would now have an overall limit of $250,000.
Under current law, a general partnership with six equal owners would have a payment limit of $750,000. This Act would reduce it to $250,000.
The peanut portion that allows an extra payment would now be subject to the same overall limit. This would reduce it down to a maximum $250,000 per farm including peanuts.
It would require family members to work more than 1,000 hours in the farm operation and provide at least 50% of the overall labor and management of the farm. If this really is the requirement, then it seems it will be difficult for many owners to meet this definition.
As an example, assume Jarrod and Mary Ann are equal owners in the farm and work at least 1,000 hours. They provide equal management. However, during harvest, they hire three part-time help to drive trucks and the grain cart. This seems to make them provide less than 50% of labor each. Based on my reading of the text, it seems to imply neither would qualify. I might be reading it wrong, but that seems to be what the text states.
If this legislation were to pass, I would be very worried about the law of unintended consequences and more entities being formed. Currently a large general partnership can have unlimited active family members and each receive up to the maximum payment limit. This would limit the payment to $250,000 which likely means these larger general partnerships will now break down into smaller two-person partnerships which will create more tax returns, more administrative burden on the local office, etc.
I know Senators Grassley and Brown mean well, but, in my opinion, there should be no limit on entities. It should simply be a limit on the owners. If they really want to limit the payments, implementing the labor requirement would be more than sufficient.
A month ago, we would estimate the chance of this bill passing as part of the farm bill as somewhere between slim and none. However, with the drama surrounding the House getting anything passed right now and their urge to reduce spending, this might see the light of day. We will keep you posted.
