[Congressional Record Volume 158, Number 47 (Wednesday, March 21, 2012)]
[Senate]
[Pages S1935-S1938]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself, Mr. Johnson of South Dakota, Mr. 
        Brown of Ohio, Mrs. Gillibrand, Mr. Enzi, Mr. Nelson of 
        Nebraska, and Mr. Harkin):
  S. 2217. A bill to amend the Food Security Act of 1985 to restore 
integrity to and strengthen payment limitation rules for commodity 
payments and benefits; to the Committee on Agriculture, Nutrition, and 
Forestry.
  Mr. GRASSLEY. Mr. President, today I am introducing the Rural America 
Preservation Act of 2012. I appreciate Senators Johnson of South 
Dakota, Enzi, Brown of Ohio, Gillibrand, Harkin, and Nelson of Nebraska 
for joining on this bill, and in this effort.
  As the Senate Agriculture Committee continues working on the next 
Farm Bill, one thing seems to be clear. The title one safety-net is 
going to look quite different than current programs. It appears the 
direct payment program may be done away with entirely. Some of my 
colleagues and agriculture groups have proposed a variety of new ideas 
as possible replacements to the current commodity title.
  No matter what commodity program we create, my bill sets the marker 
on payment limitations. I introduced a similar payment limits bill last 
year, but this bill should better address whatever type of safety-net 
program we adopt going forward. The premise remains the same. We need 
firm payment limit. We need to close loopholes.
  I support having a safety-net for farmers. This nation enjoys a safe 
and abundant food supply. Certainly a lot of that can be attributed to 
the ingenuity and hard work of the American farmer. But the farm 
safety-net helps small and medium-size farmers get through tough times 
that are out of their control.
  We need an effective safety-net to assist farmers. But equally 
important is for Congress to develop a defensible safety-net. I will 
continue to work with my Agriculture committee colleagues to figure out 
what type of program will be most effective.
  But we already know the steps that need to be taken to make it more 
defensible. Defensible means setting firm caps on the farm payments any 
one farmer can receive. The current approach does not have any overall 
cap. There is nothing wrong with farmers growing their operations. But 
big farmers shouldn't be using taxpayer dollars

[[Page S1936]]

to get even bigger. When the largest 10 percent of farmers receive 70 
percent of farm payments, something is wrong. There comes a point where 
some farms reach levels that allow them to weather the tough financial 
times on their own. Smaller farms do not have the same luxury, but they 
play a pivotal role in producing this nation's food.
  If you want to witness how farm payments to big farmers creates a 
barrier for small and beginning farmers, look at land prices. The 
current system puts upward pressure on land prices making it more 
difficult for small and beginning farmers to buy ground. This is not 
unique to Iowa. This upward pressure on land prices is occurring in 
many other states.
  This bill proposes an overall cap of $250,000 for a married couple. 
In my State, many people would say this is still too high. But I 
recognize that agriculture can look different around the country, and 
so this is a compromise. Strong payment limits will ensure farm 
payments are helping those who payments were originally created for, 
the small and medium-size farmers.
  Having an overall cap is more defensible from a Federal budget 
standpoint as well. This Nation needs to make tough decisions regarding 
all government programs. We need to find savings across the board. 
Setting strict caps on all commodity programs should be a no-brainer as 
we look to find savings and increase accountability in farm programs. 
Having a defensible safety-net also means closing loopholes in the 
current law.
  For all the rhetoric that comes out of Washington, D.C. about 
eliminating fraud, waste, and abuse, making sure non-farmers don't game 
the system is a common sense step to take. It's simple, if you are not 
a farmer, you shouldn't get a farm payment. The bill I introduced last 
year, and this bill, has language that closes the loopholes.
  After I introduced the bill last year, we received some questions 
regarding the language from two camps of people. The first camp of 
people I would say were critical because they don't want the loopholes 
closed. They would have us turn a blind eye to the fact people game the 
system. They would have us turn a blind eye to the fact we have 
nonfarmers who claim to help ``manage'' the farm by participating in 
one or two conference calls a year. To those people, I cannot satisfy 
your concerns. I will not turn a blind eye to abuses. These are 
loopholes that need to be closed.
  To the other camp of people, who have provided constructive feedback, 
I would say, we have listened. The revisions we made addressed the 
issues raised. We have improved the language closing the loopholes. 
This bill provides a tangible, workable, and fair approach. Closing 
these loopholes is the right thing to do for the American taxpayer. It 
is the right thing to do for the American farmer.
  Hard caps on farm payments and closing loopholes should be supported 
by anyone who wants an effective and defensible farm safety-net. As the 
Senate Agriculture Committee heads toward a mark-up of the Farm Bill, I 
invite my Senate colleagues to join me in supporting this bill.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2217

       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--

[[Page S1937]]

       ``(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).

[[Page S1938]]

       ``(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.
                                 ______