The 2014 Farm Bill requires USDA to revise the regulations for the term “actively engaged” in agriculture. On March 24, USDA announced proposed regulations for actively engaged. This proposed rule could potentially impact some of your operations. Today, let’s look at who this proposed rule would and would not impact.
First, what do we specifically mean by “actively engaged” in agriculture? To be eligible for many Federal farm programs, the individual or the business entity must provide a significant contribution to the agricultural operation. This significant contribution can be capital, land, and/or equipment, as well as active personal labor, active personal management, or a combination. Being actively engaged is providing active personal management, active personal labor, or a combination of the two.
With business entities such as LLCs, corporations, or partnerships, each member, shareholder, or partner would need to supply active personal management or labor to be eligible for Federal farm programs. Passive members of a business entity would be ineligible. For more information on the term actively engaged in farming, please see Actively Engaged in Farming and Payment Limits (USDA, 2015).
I should point out that the proposed change only applies to non-family farm operations. In the 2014 Farm Bill, Congress directed USDA to make the change to non-family farming operations; any proposed rule change would not impact individuals or entities comprised sole of family members (PL 113-79). According to the 2012 Census of Agriculture, Maryland has 476 non-family farming operations, or 3.9 percent of the total number of farming operations in the state. Nationally, 70,210 or 3.3 percent of all farming operations are non-family farming operations. As you can see, the potential reach of this proposed rule will be limited.
To fall under this proposed rule, the farming operation would need to include at least one non-family member. Currently, USDA views family members to include “person to whom another member in the farming operation is related as a lineal ancestor, lineal descendant, sibling, spouse, or otherwise by marriage” (§ 1400.3). Lineal ancestor would include parents, grandparents, and so on, and lineal descendants would include children, grandchildren, great-grandchildren, and so on. If a member does not fall under this definition, then the operation would be considered a non-family farm.
For non-family farming operations, the proposed rule would only apply to those seeking more than one farm manager. Non-family farms can seek to include a second manager but the operation would need to show that the operation is large, which means that the operation:
1. Produces and markets crops on 2,500 acres or more of cropland; or
2. Produce honey with more than 10,000 hives; or
3. Produce wool with more than 3,500 ewes (§ 1400.602(2)(i) – (iii)).
The Farm Service Agency (FSA) state committee has the authority to adjust this limitation plus/minus 15 percent to better fit agriculture in their state.
To add on a third manger, the non-family farming operation would need to show the operation is not only large but also complex. To be complex, we would look at the number of commodities produced on the farm, types of crops produced, geographic area in which the farm operates, alternative marketing channels, and whether the operation includes livestock production (including types of livestock produced and livestock products produced and marketed). The FSA state committee will determine if the operation meets the complexity requirements.
All non-family farming operations seeking to qualify more than one manager will be required to keep additional paperwork under the proposed rule. This recordkeeping will relate to the contribution of management by the managers (§1400.603), and will need to include at least the following:
(1) Location where the management activity was performed; and
(2) Time expended and duration of the management activity performed (§ 1400.603(a)(1)-(2)).
If records are not kept, then the manager’s contribution would be disregarded and the manager’s eligibility would be re-determined (§1400.603(c)(1)-(2)).
FSA is currently seeking comments on these proposed rule changes for what is considered actively engaged, and you have till May 26, 2015 to make a comment. To make a comment please go to http://www.regulations.gov/#!documentDetail;D=CCC-2015-0002-0001. As you can see, the rule will not touch every farm in Maryland but will potentially have some impact.
References
Agricultural Act of 2014, Pub. L. No. 113-79, http://www.fns.usda.gov/agricultural-act-2014-pl-113-79-feb-7-2014.
National Agricultural Statistics Service, U.S. Department of Agriculture, Publication No. AC-12-A-20, 2012 Census of Agriculture: Maryland State and County Data, 7 (2014).
USDA-Farm Service Agency. Actively Engaged in Farming and Payment Limits. Washington D.C.: Farm Service Agency Fact Sheet, March 2015. Internet site: http://www.fsa.usda.gov/Internet/FSA_File/activelyengaged2015.pdf.