Provide FSA with accurate info
When applying for Farm Service Agency programs, farmers often go to the local FSA office with only a general understanding of the programs and wondering whether they will receive the maximum available program payments. Most FSA employees want you to receive all available program payments, but it is their job to review your application for complete compliance.
Last year’s qualification does not guarantee this year’s qualification. Pre-application planning is often beneficial to maximize program benefits, especially when either the rules or your business structure have changed.
FSA is the agency within the USDA that administers federal farm programs, including conservation, loan, natural disaster and economic assistance programs. Available program benefits are often an important source of income for farmers, especially during difficult economic times or when a disaster occurs.
Become familiar with the rules
Laws passed by Congress establish the framework for federal farm programs, and Congress delegates the general rulemaking and enforcement of those laws to FSA. FSA has been given fairly broad authority in determining how these laws are interpreted and applied.
FSA’s 4-PL handbook, which is used by local FSA employees, attempts to put the payment eligibility rules into plain language. The 4-PL handbook can be found at FSA’s website under the tab “Laws and Regulations.” You should take the time to review the handbook so that you, at least generally, understand the rules. However, you should consult with a qualified adviser prior to application if you are concerned whether your current situation or business structure meets all of the rules. Often pre-application changes can be made to assure maximum program benefits.
Actively engaged in farming
To be eligible for FSA programs, a person or legal entity must be “actively engaged in farming.” To be considered “actively engaged in farming,” a person or legal entity must make both “left-hand” contributions of invested or borrowed capital, owned or leased equipment and owned or leased land, and “right-hand” contributions of active personal labor and active personal management.
We have assisted farmers to plan around the rule for farms having continued ownership by retired parents and investors and for farms primarily having work done through custom harvesters or other services. Careful planning can assure maximum program benefits.
Review Farm Operating Plan
FSA requires farmers to annually submit their Farm Operating Plan (Form CCC-902). FSA uses this information in determining whether you qualify for a program and in establishing your payment limitations. The importance of this form cannot be overemphasized. The Farm Operating Plan details the structure of your farm operation (sole proprietorship, general partnership, limited liability company, limited liability partnership or corporation) and how it is operated from an accounting, tax, banking and owner participation standpoint.
In most instances, farmers successfully complete this form themselves. However, you should be certain that changes in program rules, or in your business structure, owner participation or income levels will not adversely affect your farm’s qualification. We strongly suggest you treat this form with the importance of your tax return. You should contact a qualified adviser about planning alternatives prior to filing the form if you have any questions about your farm’s eligibility or payment limitations. It is difficult to make changes after the Farm Operating Plan has been filed.
Schneider is a partner in Twohig, Rietbrock, Schneider & Halbach S.C. in Chilton. The firm specializes in ag law.
This article published in the August, 2010 edition of WISCONSIN AGRICULTURIST.