NCC: Farm Law Implementation Needs Clear Direction
The NCC told a House Agriculture Committee subcommittee that critical parts of the regulations implementing payment limitations and gross income eligibility limits are inconsistent with the '08 farm law or are unclear – causing uncertainty and concern among producers.
At a June 24 hearing before the General Farm Commodities and Risk Management Subcommittee, NCC Chairman Jay Hardwick testified that the 2008 farm law’s changes on payment limitations and eligibility provisions were the most significant and far-reaching in more than 20 years. He said producers face an enormous challenge trying to understand those changes and also are dealing with additional uncertainty caused by regulations that “over-reached and guidelines and forms that seem to change monthly.”
Hardwick testified that regulatory changes made by USDA to rules involving the determination of whether a program participant is actively engaged in farming are not consistent with the farm law. Specifically, the new rules impose requirements on individual shareholders that are inconsistent with the statutory requirement that corporate farming activities be judged on a collective basis. Hardwick testified that requirements that individual contributions by shareholders must be regular, identifiable, documentable, separate and distinct introduce vague and unhelpful standards that are subject to different interpretations and are contrary to a common-sense approach to farm management and decision-making.
Hardwick noted that the introduction of the direct attribution of benefits in the new farm law could result in a 50 percent cut in benefits in certain circumstances. Other changes include strengthened penalties for breaking the rules and removing the discrimination against spouses. The old Adjusted Gross Income eligibility test was replaced with eligibility requirements based on new, untried definitions of farm and non-farm income at much lower levels. These new income limits also contain tough monitoring and enforcement provisions.
Other specific implementation concerns he noted included: 1) new "risk of loss" requirements, 2) uncertain and problematic new rules on financing and 3) new rules clamping down on the ability of a farming operation to reorganize its structure -- restricting a farm's ability to react to these new, unwarranted changes in corporate governance requirements, for example. Hardwick said the regulations were published late and the Handbook and other guidelines were not issued until spring, after many operations already had begun decision-making for the 2009 crops.
Hardwick stated that Farm Service Agency (FSA) personnel had worked hard to implement the new payment limitation provisions, but "the degree to which the implementing regulations over-reached has made the job of FSA personnel, and the ultimate impact on farmers, even more problematic. A significant source of confusion and inconsistency will be eliminated if the regulations are revised to eliminate the 'separate and distinct' requirement for corporations, partnerships and LLCs, to conform the ‘at risk’ provisions to the existing law, and to recast the spousal eligibility rules. USDA should correct all areas where they have gone beyond the new farm law. We also urge simplification of all forms.”
Hardwick noted the hardships and uncertainty posed by new income tests. He said producers now have to designate all income as farm or non-farm to determine eligibility.
“Recognizing farm income is more than just the income listed on a Schedule F, Congress provided some direction in the statute by defining certain sources as farm income and providing the Secretary with authority to define other sources of farm income,” he stated. “We have been disappointed that USDA did not do more to obtain input from farmers and accountants concerning how best to designate sources of income as farm and non-farm. USDA did not ask for recommendations concerning how to define certain sources of income for the purpose of applying the new tests thus leaving farmers with the task of interpreting the appropriate designations of income. These designations are critically important because they determine eligibility for all program benefits.”
The regulations also now allow the Agriculture Secretary to require either a certification of average income or information and documentation regarding average income every year rather than every three years.
“We urge USDA to be consistent by changing the regulations to include the option to provide sufficient documentation as an alternative to third-party certifications and to clarify that such certification or documentation must occur only every three years,” Hardwick said.
Hardwick’s stated that, "Farmers find themselves in the middle of an implementation process they don't fully understand. There are significant uncertainties about many critical aspects of these new rules, but program eligibility and livelihoods hinge on how these important questions are ultimately answered."
He added,” Given these uncertainties and the lack of clear direction, it would be patently unfair and unwarranted if oversight agencies mount a massive review of this process sometime in 2010 in an attempt to claim lack of enforcement by USDA or to claim widespread program abuses.”