Update On USDA’s Debt Relief Plan For Black And Socially Disadvantaged Farmers
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For the past year or so we’ve been keeping you informed about the historic debt relief for black farmers that was in Section 1005 of the American Rescue Plan Act (ARPA) and the subsequent lawsuits that halted distribution of the relief payments. Now, just two weeks ago, Congress passed and President Biden signed into law the Inflation Reduction Act of 2022 (IRA), which specifically repeals Section 1005 of the ARPA and replaces it. There are still a lot of unknowns, but here’s what we do know so far.
What The IRA Does Do For USDA’s Efforts To Rectify Past Discrimination
The IRA repeals Section 1005 of the ARPA—the blanket debt forgiveness for minority farmers, ranchers, and forest land owners (referred to in the ARPA as “socially disadvantaged”)—and replaces it with relief for all “distressed” farmers, ranchers, and foresters. It also amends Section 1006 of the ARPA to expand financial assistance for “underserved” farmers of all backgrounds who have experienced discrimination in USDA farm lending programs. That is, under the new IRA law, any farmer will be able to apply for relief from discrimination, and the basis of the discrimination doesn’t have to be race. It could be discrimination experienced based on age, gender or disability, for example.
How The IRA Specifically Affects The Debt Forgiveness Program
Section 22008 of the IRA specifically repeals Section 1005 of the ARPA, which provided debt relief for “socially disadvantaged” farmers, while Section 22006 of the IRA creates a new provision that provides $3.1 billion in funding for USDA to provide relief for “distressed” USDA borrowers whose agricultural operations are at risk. Specifically, the IRA takes the $4 billion from Section 1005 of the ARPA and creates a new provision that will provide $3.1 billion in funding for USDA to provide relief for at-risk agricultural operations, and all “distressed” borrowers of direct or guaranteed loans administered by USDA are potentially eligible for assistance.
Although repeal of Section 1005 means the end of that debt-cancellation program, some FSA borrowers who qualified for the ARPA debt-relief program might still qualify for debt cancellation under the IRA program. But, we don’t know who that might be. Unlike the ARPA program, the scope, terms and conditions of the IRA program will be primarily left to the discretion of the USDA to determine who qualifies as “distressed” rather than automatically available for “socially disadvantaged” producers who belong to a group that’s been subject to racial or ethnic discrimination.
Also, the IRA does not provide for a specific pathway for borrowers who already received notice from USDA that their debt would be cancelled under ARPA to receive relief under the new program.
Something else to note is that the repeal of ARPA’s Section 1005 also effectively ends the lawsuits challenging the constitutionality of ARPA’s debt cancellation program.
What’s The Timeline?
There is no information yet on a timeline for implementing the program. Secretary Vilsack has said that the agency realizes that because the COVID-19 Public Health Emergency Declaration, which led to a moratorium on farm foreclosures, is due to expire in October (October 13, 2022), there is a potential for a number of distressed farmers whose loan payments were temporarily stopped under the moratorium to once again be facing the resumption of payments and foreclosure actions. Accordingly, Secretary Vilsack told listeners to the USDA’s announcement last week that the USDA was in the process of evaluating each and every loan to determine which borrowers may be “distressed.” What criteria the agency is using to determine who might be “distressed” isn’t known, and the Secretary has said that the agency might implement a “phased effort” in which some relief is provided immediately while other more complicated cases are given further review.
The IRA Also Changes ARPA’s General Assistance Program
Under Section 1006 of the ARPA, $1 billion was allocated to provide support programs for minority producers and forest land owners and operators, including technical assistance, education, extension and financial assistance. Under the IRA, the federal government will now provide $2.2 billion for a program to give "financial assistance, including the cost of any financial assistance, to farmers, ranchers, or forest landowners determined to have experienced discrimination" prior to January 1, 2021, in USDA farm lending programs. The new provision allows any farmer, of any race, to receive assistance up to $500,000 "as determined to be appropriate based on any consequences experienced from the discrimination."
It is important to note that the agency hasn’t said how “discrimination” will be defined under the new law, nor do we know when the new program will start. The structure of the program is still being determined, but the Secretary has said that this program will not be administered by the USDA. Instead, the program will be administered by nongovernmental entities that will be selected by USDA.
Keep Following This Blog For Updates
We will continue to provide updates as we learn more about the new IRA debt-relief program, so keep watching this space.
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