[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 2217 Introduced in Senate (IS)]

112th CONGRESS
  2d Session
                                S. 2217

  To amend the Food Security Act of 1985 to restore integrity to and 
    strengthen payment limitation rules for commodity payments and 
                               benefits.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 21, 2012

 Mr. Grassley (for himself, Mr. Johnson of South Dakota, Mr. Brown of 
   Ohio, Mrs. Gillibrand, Mr. Enzi, Mr. Nelson of Nebraska, and Mr. 
    Harkin) introduced the following bill; which was read twice and 
   referred to the Committee on Agriculture, Nutrition, and Forestry

_______________________________________________________________________

                                 A BILL


 
  To amend the Food Security Act of 1985 to restore integrity to and 
    strengthen payment limitation rules for commodity payments and 
                               benefits.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Rural America Preservation Act of 
2012''.

SEC. 2. PAYMENT LIMITATIONS.

    Section 1001 of the Food Security of 1985 (7 U.S.C. 1308) is 
amended--
            (1) in subsection (a), by striking paragraph (3) and 
        inserting the following:
            ``(3) Legal entity.--
                    ``(A) In general.--The term `legal entity' means--
                            ``(i) an organization that (subject to the 
                        requirements of this section and section 1001A) 
                        is eligible to receive a payment under a 
                        provision of law referred to in subsection (b), 
                        (c), or (d);
                            ``(ii) a corporation, joint stock company, 
                        association, limited partnership, limited 
                        liability company, limited liability 
                        partnership, charitable organization, estate, 
                        irrevocable trust, grantor of a revocable 
                        trust, or other similar entity (as determined 
                        by the Secretary); and
                            ``(iii) an organization that is 
                        participating in a farming operation as a 
                        partner in a general partnership or as a 
                        participant in a joint venture.
                    ``(B) Exclusion.--The term `legal entity' does not 
                include a general partnership or joint venture.'';
            (2) by striking subsections (b) through (d) and inserting 
        the following:
    ``(b) Limitation on Payments for Covered Commodities.--The total 
amount of payments received, directly or indirectly, by a person or 
legal entity for any crop year for 1 or more covered commodities 
(except for peanuts) under title I of the Food, Conservation, and 
Energy Act of 2008 (7 U.S.C. 8701 et seq.) (or a successor provision) 
may not exceed $125,000, of which--
            ``(1) not more than $75,000 may consist of marketing loan 
        gains and loan deficiency payments under subtitle B or C of 
        title I of the Food, Conservation, and Energy Act of 2008 (7 
        U.S.C. 8731 et seq.) (or a successor provision); and
            ``(2) not more than $50,000 may consist of any other 
        payments made for covered commodities under title I of the 
        Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8702 et 
        seq.) (or a successor provision).
    ``(c) Limitation on Payments for Peanuts.--The total amount of 
payments received, directly or indirectly, by a person or legal entity 
for any crop year for peanuts under title I of the Food, Conservation, 
and Energy Act of 2008 (7 U.S.C. 8701 et seq.) (or a successor 
provision) may not exceed $125,000, of which--
            ``(1) not more than $75,000 may consist of marketing loan 
        gains and loan deficiency payments under subtitle B or C of 
        title I of the Food, Conservation, and Energy Act of 2008 (7 
        U.S.C. 8731 et seq.) (or a successor provision); and
            ``(2) not more than $50,000 may consist of any other 
        payments made for peanuts under title I of the Food, 
        Conservation, and Energy Act of 2008 (7 U.S.C. 8702 et seq.) 
        (or a successor provision).
    ``(d) Spousal Equity.--
            ``(1) In general.--Notwithstanding subsections (b) and (c), 
        except as provided in paragraph (2), if a person and the spouse 
        of the person are covered by paragraph (2) and receive, 
        directly or indirectly, any payment or gain covered by this 
        section, the total amount of payments or gains (as applicable) 
        covered by this section that the person and spouse may jointly 
        receive during any crop year may not exceed an amount equal to 
        twice the applicable dollar amounts specified in subsections 
        (b) and (c).
            ``(2) Exceptions.--
                    ``(A) Separate farming operations.--In the case of 
                a married couple in which each spouse, before the 
                marriage, was separately engaged in an unrelated 
                farming operation, each spouse shall be treated as a 
                separate person with respect to a farming operation 
                brought into the marriage by a spouse, subject to the 
                condition that the farming operation shall remain a 
                separate farming operation, as determined by the 
                Secretary.
                    ``(B) Election to receive separate payments.--A 
                married couple may elect to receive payments separately 
                in the name of each spouse if the total amount of 
                payments and benefits described in subsections (b) and 
                (c) that the married couple receives, directly or 
                indirectly, does not exceed an amount equal to twice 
                the applicable dollar amounts specified in those 
                subsections.'';
            (3) in paragraph (3)(B) of subsection (f), by adding at the 
        end the following:
                            ``(iii) Irrevocable trusts.--In 
                        promulgating regulations to define the term 
                        `legal entity' as the term applies to 
                        irrevocable trusts, the Secretary shall ensure 
                        that irrevocable trusts are legitimate entities 
                        that have not been created for the purpose of 
                        avoiding a payment limitation.''; and
            (4) in subsection (h), in the second sentence, by striking 
        ``or other entity'' and inserting ``or legal entity''.

SEC. 3. SUBSTANTIVE CHANGE; PAYMENTS LIMITED TO ACTIVE FARMERS.

    The Food Security Act of 1985 is amended by striking section 1001A 
(7 U.S.C. 1308-1) and inserting the following:

``SEC. 1001A. SUBSTANTIVE CHANGE; PAYMENTS LIMITED TO ACTIVE FARMERS.

    ``(a) Substantive Change.--
            ``(1) In general.--For purposes of the application of 
        limitations under this section, the Secretary shall not approve 
        any change in a farming operation that otherwise would increase 
        the number of persons or legal entities to which the 
        limitations under this section apply, unless the Secretary 
        determines that the change is bona fide and substantive.
            ``(2) Separate equipment and labor.--For the purpose of 
        paragraph (1), any division of a farming operation into 2 or 
        more units under which the equipment and labor are not 
        substantially separate shall not be considered bona fide and 
        substantive.
            ``(3) Family members.--For the purpose of paragraph (1), 
        the addition of a family member to a farming operation under 
        the criteria established under subsection (b)(3)(B) shall be 
        considered to be a bona fide and substantive change in the 
        farming operation.
            ``(4) Primary control.--To prevent a farming operation from 
        reorganizing in a manner that is inconsistent with the purposes 
        of this Act, the Secretary shall promulgate such regulations as 
        the Secretary determines to be necessary to simultaneously 
        attribute payments for a farming operation to more than 1 
        person or legal entity, including the person or legal entity 
        that exercises primary control over the farming operation, 
        including to respond to--
                    ``(A)(i) any instance in which ownership of a 
                farming operation is transferred to a person or legal 
                entity under an arrangement that provides for the sale 
                or exchange of any asset or ownership interest in 1 or 
                more legal entities at less than fair market value; and
                    ``(ii) the transferor is provided preferential 
                rights to repurchase the asset or interest at less than 
                fair market value; or
                    ``(B) a sale or exchange of any asset or ownership 
                interest in 1 or more legal entities under an 
                arrangement under which rights to exercise control over 
                the asset or interest are retained, directly or 
                indirectly, by the transferor.
    ``(b) Payments Limited to Active Farmers.--
            ``(1) In general.--To be eligible to receive, directly or 
        indirectly, payments or benefits described as being subject to 
        limitation in subsection (b) or (c) of section 1001 with 
        respect to a particular farming operation, a person or legal 
        entity shall be actively engaged in farming with respect to the 
        farming operation, in accordance with paragraphs (2), (3), and 
        (4).
            ``(2) General classes actively engaged in farming.--
                    ``(A) Definition of active personal management.--In 
                this paragraph, the term `active personal management' 
                means, with respect to a person, management duties 
                carried out by the person for a farming operation that 
                are personally provided by the person on a regular, 
                continuous, and substantial basis, including the 
                supervision and direction of--
                            ``(i) activities and labor involved in the 
                        farming operation; and
                            ``(ii) onsite services directly related and 
                        necessary to the farming operation.
                    ``(B) Active engagement.--Except as provided in 
                paragraph (3), for purposes of paragraph (1), the 
                following shall apply:
                            ``(i) A person shall be considered to be 
                        actively engaged in farming with respect to a 
                        farming operation if--
                                    ``(I) the person makes a 
                                significant contribution, as determined 
                                under subparagraph (E) (based on the 
                                total value of the farming operation), 
                                to the farming operation of--
                                            ``(aa) capital, equipment, 
                                        or land; and
                                            ``(bb) personal labor or 
                                        active personal management;
                                    ``(II) the share of the profits or 
                                losses of the person from the farming 
                                operation is commensurate with the 
                                contributions of the person to the 
                                operation; and
                                    ``(III) a contribution of the 
                                person is at risk.
                            ``(ii) A legal entity shall be considered 
                        to be actively engaged in farming with respect 
                        to a farming operation if--
                                    ``(I) the legal entity makes a 
                                significant contribution, as determined 
                                under subparagraph (E) (based on the 
                                total value of the farming operation), 
                                to the farming operation of capital, 
                                equipment, or land;
                                    ``(II)(aa) the stockholders or 
                                members that collectively own at least 
                                51 percent of the combined beneficial 
                                interest in the legal entity each make 
                                a significant contribution of personal 
                                labor or active personal management to 
                                the operation; or
                                    ``(bb) in the case of a legal 
                                entity in which all of the beneficial 
                                interests are held by family members, 
                                any stockholder or member (or household 
                                comprised of a stockholder or member 
                                and the spouse of the stockholder or 
                                member) who owns at least 10 percent of 
                                the beneficial interest in the legal 
                                entity makes a significant contribution 
                                of personal labor or active personal 
                                management; and
                                    ``(III) the legal entity meets the 
                                requirements of subclauses (II) and 
                                (III) of clause (i).
                    ``(C) Certain entities making significant 
                contributions.--If a general partnership, joint 
                venture, or similar entity (as determined by the 
                Secretary) separately makes a significant contribution 
                (based on the total value of the farming operation 
                involved) of capital, equipment, or land, the partners 
                or members making a significant contribution of 
                personal labor or active personal management and 
                meeting the standards provided in subclauses (II) and 
                (III) of subparagraph (B)(i) shall be considered to be 
                actively engaged in farming with respect to the farming 
                operation involved.
                    ``(D) Equipment and personal labor.--In making 
                determinations under this subsection regarding 
                equipment and personal labor, the Secretary shall take 
                into consideration the equipment and personal labor 
                normally and customarily provided by farm operators in 
                the area involved to produce program crops.
                    ``(E) Significant contribution of personal labor or 
                active personal management.--
                            ``(i) In general.--Subject to clause (ii), 
                        for purposes of subparagraph (B), a person 
                        shall be considered to be providing, on behalf 
                        of the person or a legal entity, a significant 
                        contribution of personal labor or active 
                        personal management, if the total contribution 
                        of personal labor and active personal 
                        management is at least equal to the lesser of--
                                    ``(I) 1,000 hours; or
                                    ``(II) a period of time equal to--
                                            ``(aa) 50 percent of the 
                                        commensurate share of the total 
                                        number of hours of personal 
                                        labor or active personal 
                                        management required to conduct 
                                        the farming operation; or
                                            ``(bb) in the case of a 
                                        stockholder or member (or 
                                        household comprised of a 
                                        stockholder or member and the 
                                        spouse of the stockholder or 
                                        member) that owns at least 10 
                                        percent of the beneficial 
                                        interest in a legal entity in 
                                        which all of the beneficial 
                                        interests are held by family 
                                        members who do not collectively 
                                        receive payments directly or 
                                        indirectly, including payments 
                                        received by spouses, of more 
                                        than twice the applicable 
                                        limit, 50 percent of the 
                                        commensurate share of hours of 
                                        the personal labor or active 
                                        personal management of all 
                                        family members required to 
                                        conduct the farming operation.
                            ``(ii) Minimum labor hours.--For the 
                        purpose of clause (i), the minimum number of 
                        labor hours required to produce a commodity 
                        shall be equal to the number of hours that 
                        would be necessary to conduct a farming 
                        operation for the production of each commodity 
                        that is comparable in size to the commensurate 
                        share of a person or legal entity in the 
                        farming operation for the production of the 
                        commodity, based on the minimum number of hours 
                        per acre required to produce the commodity in 
                        the State in which the farming operation is 
                        located, as determined by the Secretary.
            ``(3) Special classes actively engaged in farming.--
        Notwithstanding paragraph (2), the following persons shall be 
        considered to be actively engaged in farming with respect to a 
        farm operation:
                    ``(A) Landowners.--A person or legal entity that is 
                a landowner contributing owned land, and that meets the 
                requirements of subclauses (II) and (III) of paragraph 
                (2)(B)(i), if, as determined by the Secretary--
                            ``(i) the landowner share-rents the land at 
                        a rate that is usual and customary; and
                            ``(ii) the share received by the landowner 
                        is commensurate with the share of the crop or 
                        income received as rent.
                    ``(B) Family members.--With respect to a farming 
                operation conducted by persons who are family members, 
                or a legal entity the majority of the stockholders or 
                members of which are family members, an adult family 
                member who makes a significant contribution (based on 
                the total value of the farming operation) of active 
                personal management or personal labor and, with respect 
                to such contribution, who meets the requirements of 
                subclauses (II) and (III) of paragraph (2)(B)(i).
                    ``(C) Sharecroppers.--A sharecropper who makes a 
                significant contribution of personal labor to the 
                farming operation and, with respect to such 
                contribution, who meets the requirements of subclauses 
                (II) and (III) of paragraph (2)(B)(i), and who was 
                receiving payments from the landowner as a sharecropper 
                prior to the effective date of the Food, Conservation, 
                and Energy Act of 2008 (Public Law 110-246; 122 Stat. 
                1651).
                    ``(D) Farm managers.--A person who otherwise meets 
                the requirements of this subsection other than 
                paragraph (2)(E) if--
                            ``(i) the individual--
                                    ``(I)(aa) provides more than 50 
                                percent of the commensurate share of 
                                the total number of hours of active 
                                personal management required to conduct 
                                the farming operation; and
                                    ``(bb) is, with respect to the 
                                commensurate share of the individual, 
                                the only party who is providing active 
                                personal management and who is at risk, 
                                other than a landlord, if any, 
                                described in subparagraph (A); or
                                    ``(II)(aa) is the only individual 
                                qualifying the farming operation 
                                (including a sole proprietorship, legal 
                                entity, general partnership, or joint 
                                venture) as actively engaged in 
                                farming; and
                                    ``(bb) qualifies only a single sole 
                                proprietorship, legal entity, general 
                                partnership, or joint venture as 
                                actively engaged in farming;
                            ``(ii) the individual does not provide 
                        active personal management to meet the 
                        requirements of this subsection for persons or 
                        legal entities that collectively receive, 
                        directly or indirectly, an amount equal to more 
                        than the applicable limits under subsections 
                        (b), (c), and (d) of section 1001; and
                            ``(iii) the individual manages a farm 
                        operation that is not jointly managed with 
                        persons or legal entities that collectively 
                        receive, directly or indirectly, an amount 
                        equal to more than the applicable limits under 
                        subsections (b), (c), and (d) of section 1001.
            ``(4) Persons and legal entities not actively engaged in 
        farming.--For the purposes of paragraph (1), except as provided 
        in paragraph (3), the following persons and legal entities 
        shall not be considered to be actively engaged in farming with 
        respect to a farm operation:
                    ``(A) Landlords.--A landlord contributing land to 
                the farming operation if the landlord receives cash 
                rent, or a crop share guaranteed as to the amount of 
                the commodity to be paid in rent, for such use of the 
                land.
                    ``(B) Other persons and legal entities.--Any other 
                person or legal entity, or class of persons or legal 
                entities, that fails to meet the requirements of 
                paragraphs (2) and (3), as determined by the Secretary.
            ``(5) Personal labor or active personal management.--No 
        stockholder or other member of a legal entity or person may 
        provide personal labor or active personal management to meet 
        the requirements of this subsection for persons or legal 
        entities that collectively receive, directly or indirectly, an 
        amount equal to--
                    ``(A) more than the applicable limits under 
                subsections (b) and (c) of section 1001; or
                    ``(B) in the case of a stockholder or member in 
                conjunction with the spouse of the stockholder or 
                member, more than the applicable limits described in 
                subparagraph (A).
            ``(6) Custom farming services.--A person or legal entity 
        receiving custom farming services will be considered separately 
        eligible for payment limitation purposes if the person or legal 
        entity is actively engaged in farming based on paragraphs (1) 
        through (3).
            ``(7) Growers of hybrid seed.--To determine whether a 
        person or legal entity growing hybrid seed under contract shall 
        be considered to be actively engaged in farming, the Secretary 
        shall not take into consideration the existence of a hybrid 
        seed contract.
    ``(c) Notification by Legal Entities.--To facilitate the 
administration of this section, each legal entity that receives 
payments or benefits described as being subject to limitation in 
subsection (b) or (c) of section 1001 with respect to a particular 
farming operation shall--
            ``(1) notify each person or other legal entity that 
        acquires or holds a beneficial interest in the farming 
        operation of the requirements and limitations under this 
        section; and
            ``(2) provide to the Secretary, at such times and in such 
        manner as the Secretary may require, the name and social 
        security number of each person, or the name and taxpayer 
        identification number of each legal entity, that holds or 
        acquires such a beneficial interest.''.

SEC. 4. FOREIGN PERSONS AND LEGAL ENTITIES MADE INELIGIBLE FOR PROGRAM 
              BENEFITS.

    Section 1001C of the Food Security Act of 1985 (7 U.S.C. 1308-3) is 
amended--
            (1) in the section heading, by striking ``persons'' and 
        inserting ``persons and legal entities'';
            (2) in subsection (b)--
                    (A) in the subsection heading, by striking 
                ``Corporation or Other'' and inserting ``Legal'';
                    (B) in the first sentence, by striking ``a 
                corporation or other entity shall be considered a 
                person that'' and inserting ``a legal entity''; and
                    (C) in the second sentence, by striking ``an 
                entity'' and inserting ``a legal entity''; and
            (3) in subsection (c), by striking ``person'' and inserting 
        ``legal entity or person''.

SEC. 5. BUDGETARY EFFECTS.

    The budgetary effects of this Act, for the purpose of complying 
with the Statutory Pay-As-You-Go Act of 2010, shall be determined by 
reference to the latest statement titled ``Budgetary Effects of PAYGO 
Legislation'' for this Act, submitted for printing in the Congressional 
Record by the Chairman of the Senate Budget Committee, provided that 
such statement has been submitted prior to the vote on passage.
                                 <all>