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.

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:

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.