On Monday of this week, USDA published a proposed rule in the
Federal Register on income qualification limits for farm program
participation.
These regulations set forth the criteria to be applied in determining
whether certain income limits have been exceeded by an individual or
entity, which would make the individual or entity ineligible for certain
Commodity Credit Corporation (CCC) commodity and conservation program
benefits.
Section 1603 of the 2002 Farm Bill amended the Food Security Act of
1985 by adding a new section to provide that individuals or entities shall
not be eligible to receive direct payments, counter-cyclical payments,
marketing loan gains nor a payment under any of the conservation program
authorized under title XII of the Food Security Act of 1985 Act, nor a
payment under the conservation programs of title II of the 2002 Act, if
the three year average of the adjusted gross income of the individual, or
comparable measure for an entity, exceeds $2.5 million. An exemption,
though, is provided where not less than 75 percent of the adjusted gross
income is derived from farming, ranching, or forestry operations.
According to USDA, the proposed rule generally provides that for
individuals CCC will use the adjusted gross incomes reported by the
individual in the prior three years to the Internal Revenue Service (IRS),
United States Department of Treasury, and a comparable amount for all
other entities such as corporations, limited partnerships, and charitable
institutions.
For individuals, the adjusted gross income would be the amount on the
individual’s final (including amendments) tax return for the applicable
year. Where there is a joint return filed, the adjusted gross income
specified on the joint return will be used unless a certified public
accountant or attorney provides a certified statement delineating the
distribution of income and expenses if the two taxpayers would have filed
separate returns.
For corporations including a ‘‘sub-chapter S corporation’’, the
adjusted gross income will be the final taxable income plus charitable
contributions. USDA indicates that the proposed rule includes charitable
contributions in order to provide equitable treatment compared to
individuals.
For charitable organizations with income that is not subject to Federal
income taxation, the comparable measure of adjusted gross income is
proposed to be ‘‘unrelated business taxable income’’ of the entity as
reported to the Internal Revenue Service less any other income CCC
determines to be from commercial activities. Effectively, the adjusted
gross income for these entities would be the net income from only their
commercial activities.
For a general partnership, foreign partnership, limited liability
company, limited partnership, limited liability partnership or similar
organization, the adjusted gross income will be the sum of the income from
trade or business activities plus the guaranteed payments to the members
as reported for the applicable tax year.
For an estate or trust, the adjusted gross income will be the sum of
the adjusted total income plus the charitable deductions as reported for
the applicable tax year.
Comments on the rule may be submitted until November 27, 2002, to the
attention of Dan McGlynn, Production, Emergencies and Compliance Division,
United States Department of Agriculture (USDA), Stop 0517, 1400
Independence Ave. SW., Washington, DC 20250–0517. Telephone: (202)
720–3463. Electronic mail: Income_Limits@wdc.usda.gov.
Click
here for the USDA Proposed Rule on Income
Qualifications.
