USDA and IRS want to collaborate on policing farm payments

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In response to the discovery of nearly $50 million in payments to ineligible farmers, Agriculture Secretary Tom Vilsack announced in March that the U.S. Department of Agriculture (USDA) and Internal Revenue Service (IRS) have begun efforts to ensure that high-income individuals and entities who request USDA payments meet income limits set forth in the 2008 Farm Bill.

Beginning with the 2009 crop year and for successive years, in order to be eligible for USDA payments all recipients will be required to sign a separate form which grants IRS the authority to provide income information to USDA for verification purposes.

Before IRS will provide the information for a particular producer, IRS form 8821, or a similar form, must be obtained from each producer authorizing the release of information. Failure to obtain such form will make the producer ineligible for program benefits.

A written release from each producer or payment recipient will be required for this process. The Farm Service Agency will not receive actual tax data for the producers. All disclosure and Privacy Act provisions will be adhered to by the Farm Service Agency.

Statements from Vilsack and Treasury Secretary Tim Geithner, both stated the goal is to limit excessive payments and make certain USDA payment are not issued to individuals and entities that exceed eligibility limits established by law.

In October 2008, the U.S. Government Accountability Office (GAO) released a report stating that because the USDA does not have the management controls - such as reviewing tax returns - it could not ensure that payments are made only to qualified individuals. The GAO report also found that of the 1.8 million individuals receiving farm payments over a three year period (2003 through 2006), more than 2,500 had an average adjusted gross income (AGI) that made them ineligible for farm payments. Because of the inability of USDA to verify income, more than $49 million was paid to ineligible individuals.

The 2008 Farm Bill mandates that recipients of many Farm Bill payments, including direct payments, are not eligible for these payments if their gross nonfarm income average for the previous three taxable years is greater than $500,000. Additionally, direct payments cannot be paid to participants whose average adjusted gross farm income for the three-year period exceeds $750,000. Participants are ineligible for conservation payments if their nonfarm average gross income for the three-year period exceeds $1 million, unless at least two-thirds of their total average adjusted gross income is derived from farming.

Republicans unsure of system

House Agriculture Committee ranking member Frank Lucas along with eight of his Republican colleagues on the Agriculture committee sent a critical letter to Vilsack asking him to rethink USDA's recent announcement that the department will require all farmers to sign a form, which grants the IRS the authority to provide income information to USDA for verification purposes. Failure to comply with this new requirement will make the producer ineligible for program benefits.

According to a recent release from USDA, this new requirement is in response to a U.S. Government Accountability Office (GAO) report that was released in October 2008. In that report, GAO found that between 2003 and 2006, there were 2,702 recipients of USDA program payments who exceeded income eligibility guidelines. Roughly two million individuals receive USDA program payments each year.

They wrote that this invasion of privacy is clearly against Congressional intent.

"Congress allowed for a verification of income statement, prepared by a certified public accountant or another third party acceptable to you, to be submitted every three years that confirms the producer's adjusted gross income which makes he or she eligible to receive payment," the letter stated.

"By forcing every producer to give USDA the power to verify with the IRS information submitted by the farmer or rancher takes away this choice, unnecessarily invades privacy and contravenes the intent of Congress. We, of course, do not want ineligible producers receiving payments, but Congress provided an explicit mechanism to address the problem without involving the IRS," the representatives added.

In addition, the representatives voiced frustration over the short period of during which farmers can comment on the announcement. "We will be surprised if farmers even get the word that this new obligation is imposed on them before the comment period is closed on April 6, 2009."


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