[Federal Register Volume 73, Number 249 (Monday, December 29, 2008)]
[Rules and Regulations]
[Pages 79267-79284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-30764]



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  Federal Register / Vol. 73, No. 249 / Monday, December 29, 2008 / 
Rules and Regulations  

[[Page 79267]]



DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR 1400

RIN 0560-AH85


Farm Program Payment Limitation and Payment Eligibility for 2009 
and Subsequent Crop, Program, or Fiscal Years

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Interim rule.

-----------------------------------------------------------------------

SUMMARY: The Commodity Credit Corporation (CCC) is revising regulations 
as required by the Food, Conservation, and Energy Act of 2008 (the 2008 
Farm Bill) to make changes in payment eligibility, payment attribution, 
maximum income limits, and maximum dollar benefit amounts for 
participants in CCC-funded programs. This interim rule amends the 
regulations to ensure that program payments and benefits are issued 
only to those persons and entities that meet all eligibility 
requirements, that a program participant does not receive any program 
payment above the maximum allowable benefit amount, and that applicable 
payments are not made to anyone whose average adjusted gross income 
exceeds the maximum dollar amounts established by the 2008 Farm Bill. 
This interim rule will apply to 2009 and subsequent crop, program, or 
fiscal year benefits for programs subject to the provisions in our 
regulations.

DATES: Effective Date: This rule is effective December 23, 2008.
    Comment Date: We will consider comments that we receive by January 
28, 2009.

ADDRESSES: We invite you to submit comments on this interim rule. In 
your comment, include the volume, date, and page number of this issue 
of the Federal Register. You may submit comments by any of the 
following methods:
     E-Mail: [email protected].
     Fax: (202) 690-2130.
     Mail: Salomon Ramirez, Director, Production, Emergencies 
and Compliance Division, FSA, U.S. Department of Agriculture (USDA), 
Stop 0517, Room 4752, 1400 Independence Ave., SW., Washington, DC 
20250-0517.
     Hand Delivery or Courier: Deliver comments to the above 
address.
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.
    Comments may be inspected at the mail address listed above between 
8 a.m. and 4:30 p.m., Monday through Friday, except holidays. A copy of 
this interim rule is available through the Farm Service Agency (FSA) 
home page at http://www.fsa.usda.gov/.

FOR FURTHER INFORMATION CONTACT: Salomon Ramirez, Director, Production, 
Emergencies and Compliance Division, FSA, USDA, Stop 0517, 1400 
Independence Ave., SW., Washington, DC 20250-0517. Telephone: (202) 
720-7641. Electronic mail: [email protected]. Persons with 
disabilities who require alternative means for communication (Braille, 
large print, audio tape, etc.) should contact the USDA Target Center at 
(202) 720-2600 (voice and TDD).

SUPPLEMENTARY INFORMATION:

Background

    This rule implements provisions in sections 1603 and 1604 of the 
2008 Farm Bill (Pub. L. 110-246) concerning payment eligibility and 
payment limits for participants in CCC-funded programs. The 2008 Farm 
Bill provides new eligibility requirements based on annual income, 
sources of income, and type of entity. This rule amends 7 CFR part 1400 
to implement these changes.

Applicability of Part 1400

    The applicability of part 1400 is amended as required by the 2008 
Farm Bill to include new programs authorized by the 2008 Farm Bill. 
These changes are specified in Sec.  1400.1, ``Applicability.'' All of 
the amendments made by this rule apply to the 2009 and subsequent crop, 
program, or fiscal years.

Payment Eligibility--Annual Income and Sources of Income

    The 2008 Farm Bill provides that, notwithstanding any other 
provision of law, a person or legal entity is not eligible to receive 
commodity program benefits such as direct payments and counter-cyclical 
payments or Average Crop Revenue Election (ACRE) program payments if 
the average adjusted gross income (AGI) of the person or legal entity 
from nonfarm sources exceeds $500,000. Similarly, a person or legal 
entity is not eligible for direct payments if the average adjusted 
gross income from farming, ranching, and forestry operations of the 
person or legal entity exceeds $750,000. A person or legal entity is 
ineligible for conservation program benefits or payments if the average 
adjusted gross nonfarm income of the person or legal entity exceeds 
$1,000,000, unless not less than 66.66 percent of the adjusted gross 
income of the person or legal entity is derived from farming, ranching, 
and forestry operations, as determined by the Secretary. As required by 
the 2008 Farm Bill, this rule provides that with respect to programs 
administered by FSA the Administrator of FSA may waive the AGI limit 
for conservation and related program benefits on a case-by-case basis 
for the protection of environmentally sensitive land or other land of 
special significance. Similarly, with respect to programs administered 
by the Natural Resources Conservation Service (NRCS), this rule 
provides that the Chief of NRCS may issue such a waiver. Specific 
criteria that must be met for the consideration of the wavier are 
outlined in this rule.
    The AGI limits implemented by this rule replace the prior limit of 
$2.5 million and the previous exception for those earning 75 percent of 
their income from farming.
    This rule amends Sec.  1400.3, ``Definitions,'' to add definitions 
for ``Average Adjusted Gross Income,'' ``Average Adjusted Gross Farm 
Income,'' and ``Average Adjusted Gross Nonfarm Income.'' It also amends 
subpart F (prior to this rule, subpart G), ``Average Adjusted Gross 
Income Limitation,'' to implement these AGI limits that are required by 
the 2008 Farm Bill.
    The 2008 Farm Bill AGI requirements for payment eligibility apply 
to payments from commodity programs

[[Page 79268]]

and from all conservation programs that are specified by Title II of 
the 2008 Farm Bill and Title XII of the Food Security Act of 1985 (Pub. 
L. 99-198, commonly known as the 1985 Farm Bill). AGI will be 
calculated based on the average income for the 3 taxable years 
preceding the most immediately preceding complete taxable year for 
which benefits are requested. The 3 year average method of determining 
AGI is unchanged, except that the relevant 3 year period is now the 3 
taxable years preceding the most immediately preceding complete taxable 
year for which benefits are requested, while previously the method used 
the 3 years prior to the year for which program benefits are requested. 
The definition of AGI will be based on the Internal Revenue Service 
definition, which is unchanged.
    The definition of income derived from farming, ranching, and 
forestry operations in Sec.  1400.501, ``Determination of Average 
Adjusted Gross Income,'' is expanded by this rule to include income 
from the processing, storing, and transporting of farm, ranch, and 
forestry commodities; production of farm-based renewable energy; and, 
in some instances, the provision of production inputs and services to 
farmers, ranchers, and foresters. These activities were included in the 
provisions for determining farm income in section 1604 of the 2008 Farm 
Bill.

Payment Limits for Specific Programs

    Subpart A, ``General Provisions,'' Sec.  1400.1, ``Applicability,'' 
sets payment limits for specific programs. The 2008 Farm Bill provides 
that the payment limit is $40,000 for the Direct and Counter-cyclical 
Program (DCP) direct payments and $65,000 for DCP counter-cyclical 
payments. That is unchanged from the previous limit. The limit of 
$50,000 for CRP payments is unchanged. The limit of $100,000 for 
Noninsured Crop Disaster Assistance Program (NAP) payments is 
unchanged. The limit on Environmental Quality Incentives Program (EQIP) 
payments is reduced from $450,000 to $300,000 for the term of the 
program.
    This rule adds a limit of $100,000 for Supplemental Revenue 
Assistance Program (SURE) payments and for Tree Assistance Program 
(TAP) payments. Total payments from SURE, the Livestock Indemnity 
Program (LIP), the Livestock Forage Disaster Program (LFP), and the 
Emergency Assistance Program for Livestock, Honey Bees, and Farm-raised 
Fish (ELAP) may not exceed $100,000.
    This rule removes the limit of $75,000 specifically for the 
Marketing Assistance Loans (MAL) program gains and Loan Deficiency 
Payments (LDP) program; there are no longer any limits on payments for 
MAL and LDP.
    As specified in the 2008 Farm Bill, if a person or legal entity is 
participating in ACRE, the direct payments will be reduced by 20 
percent on each farm participating in ACRE. The total limit for 
counter-cyclical payments and ACRE payments as specified in this rule 
is $65,000 plus the amount the direct payments were reduced. The 2008 
Farm Bill specifies the same limits for peanuts. All the program-
specific payment limits are specified in Sec.  1400.1, 
``Applicability.''

Payment Limitation--Eligible Persons and Entities

    The regulations governing persons and legal entities eligible for 
payments are in part 1400, subpart B. This rule changes the title of 
subpart B, ``Person Determinations,'' to ``Payment Limitation'' and 
makes other changes to the subpart required by the 2008 Farm Bill.
    This rule amends the definition of ``person'' and adds a definition 
of ``legal entity'' in Sec.  1400.3, ``Definitions.'' The 2008 Farm 
Bill defines ``person'' as a natural person. The definition of person 
in this rule no longer includes a legal entity or government agency.
    This rule removes the sections in subpart B describing various 
kinds of legal entities that are no longer relevant for the purpose of 
determining payment limits.
    This rule changes the provisions for spouses in regard to separate 
or combined status for payment limitation purposes. Spouses may still 
each qualify for a separate payment limitation, but the provisions 
where husband and wife are considered combined for the purposes of this 
part are removed. While each spouse may now have their own respective 
limitation, each must also meet applicable program and payment 
eligibility requirements to receive program benefits. The rule includes 
a new provision by which if one spouse is determined to be actively 
engaged in farming, the other spouse is credited for the purposes of 
payment eligibility with making significant contributions of active 
personal labor or active personal management to the farming operation. 
This is not to be construed as meaning if one spouse qualifies for 
payment, the other automatically qualifies as well. As previously 
mentioned, both spouses must make significant and requisite 
contributions to the farming operation that are commensurate with their 
claimed shares to be considered actively engaged in farming and 
eligible for program benefits.
    This rule removes both the 3-entity rule for payment limitation 
purposes and the definition of substantial beneficial interest. A 
person may now receive program benefits through an unlimited number of 
entities. The process of determining payment limits for entities no 
longer requires a designation of substantial beneficial interest. Since 
substantial beneficial interest only applied to the designation of 
entities for payment under the 3-entity rule, that term is not 
necessary and has been removed.
    Payment limitation will be determined by direct attribution, taking 
into account the direct and indirect ownership interests of a person or 
legal entity that is eligible to receive such payment. The new 
attribution of payments provisions are in a new Sec.  1400.105, 
``Attribution of Payments,'' and a new definition of attribution is 
added to Sec.  1400.3, ``Definitions.'' Attribution will be tracked 
through four levels of ownership in legal entities. For the purposes of 
determining whether a person or legal entity has met the new payment 
limits, every payment made directly to a person or legal entity will be 
combined with their pro rata interest in payments received by a legal 
entity in which the person or legal entity has a direct or indirect 
ownership interest. Payments made to a legal entity will be attributed 
directly to persons and limited to the amounts specified in subpart A.
    This rule adds a new Sec.  1400.107, ``Notification of Interests,'' 
which requires each person or legal entity receiving payments to 
provide the name and taxpayer ID number of each legal entity in which 
the person or legal entity holds an ownership interest. While this is 
designated as a new section, this requirement was in effect previous to 
the 2008 Farm Bill, as part of the eligibility requirements for the 
now-obsolete 3-entity rule.
    Payments made to a joint venture or general partnership will not 
exceed the payment limit multiplied by the number of persons or legal 
entities (other than joint ventures and general partnerships) that 
comprise the direct ownership of the joint venture or general 
partnership.
    Payments issued to a minor child will be attributed to the child's 
parent who receives the larger amount in program payments compared to 
the other parent, both directly and indirectly, unless certain 
conditions are otherwise met.
    For the purposes of attribution in Sec.  1400.105, ``Attribution of 
Payments,'' the payment limitations specified will not apply to 
marketing cooperatives but

[[Page 79269]]

will now apply to the producers or members of those cooperatives as 
persons.
    The 2008 Farm Bill provides that Federal agencies are not eligible 
for program benefits. Similarly, State and local governments and 
political subdivisions, and agencies thereof, will no longer be 
eligible, with an exception for payments earned on State-owned land 
that is used for the support of public schools. Payments received under 
this public school support exception are limited to $500,000 annually, 
unless the State has a population of less than 1.5 million.
    This rule amends Sec.  1400.3 by removing the definition of 
``Tribal venture.'' This rule also amends Sec.  1400.4 by removing all 
references to Indian tribal ventures, including the restrictions on 
payments to such ventures. In this rule, Sec.  1400.4 exempts Indian 
tribes, as defined in 1400.3, from all requirements of this part. 
Provisions of this part apply to persons or legal entities. Indian 
tribes are not included under the definition of person or legal entity 
as provided by the 2008 Farm Bill for the application of the payment 
eligibility and payment limitation provisions. The 2008 Farm Bill does 
not impose any limitations or restrictions on program payments and 
benefits to Federally recognized Indian tribes. This exemption to the 
provisions of this part only applies to Indian tribes. The payment 
eligibility and payment limitation requirements remain applicable to 
individual American Indians or Alaska Natives receiving program payment 
and benefits as individuals, or through a group in which all members of 
the group are American Indians or Alaska Natives.
    This rule provides more restrictive payment eligibility 
requirements than the prior requirements for new persons and legal 
entities that are added to an existing farming operation. These 
requirements, referred to as the ``substantive change'' rule, are found 
in Sec.  1400.104 (previously Sec.  1400.109), ``Changes in Farming 
Operations.'' These discretionary changes require that any transfer of 
land or equipment by sale or gifting between existing members and new 
members must be based on fair market value of the land or equipment, 
the sale cannot be owner financed, and the former owner of the land or 
equipment cannot retain any residual control or preferential buyback 
rights to the land or equipment. This is to ensure that this change or 
transfer actually occurs other than just on paper. Otherwise, the 
person or legal entity being added to the farming operation could be 
obtaining program payments in the absence of making the requisite and 
significant contributions to the farming operation for eligibility. 
Furthermore, the farming operation would be gaining another limitation 
even though no real, meaningful change occurred in the farming 
operation to justify the additional limitation.
    Requirements in the substantive change rule for an addition of 
persons or legal entities to an existing farming operation can also be 
met through an addition of land to the existing farming operation. 
Previously, an increase of cropland operated by the farming operation 
of at least 20 percent and with a planting history comparable to the 
area was required. Now the requirement is the addition of base acres in 
an amount that represents at least a 20 percent increase from the 
previous year. This 20 percent increase in base acres will now qualify 
one additional person or legal entity for payment limitation purposes, 
rather than an unlimited number of additional persons or legal 
entities. However, additional persons or legal entities beyond one for 
payment limitation purposes may be recognized if an FSA State Office 
specialist determines that the increase in base acres was of a 
magnitude that would support further additions to the farming operation 
of persons or legal entities for payment limitation purposes.
    These revisions to the substantive change rule are being announced 
prior to the beginning of a crop or program year to afford adequate 
time for any existing farming operation and its members that are 
contemplating such operational changes for the coming year to be fully 
informed of these revisions.
    An example of whether a change in farming operations will be 
considered a ``substantive change'' by this rule would be that Father A 
has previously conducted an individual farming operation consisting of 
all owned land. In 2009, Father A expands the operation by forming a 
three-member general partnership with his now adult children B and C, 
and with each member having equal shares. No additional acreage is 
farmed, but Father A has gifted to each child one-third of the owned 
land. The gifted land is commensurate with individuals' share of the 
farming operation. Previously, this would be considered a bona fide and 
substantive change in the farming operation. Through the landowner 
provision, each person would be considered actively engaged in farming 
and each would have their own respective payment limitation.
    With this interim rule, this would still be considered a 
substantive change in the farming operation, but proof of the gifting 
of this land to the children must be provided. The land transfers would 
most likely be recorded at the Register of Deeds, new deeds would be 
issued to reflect the current owners of the land, and all parties would 
have been expected to report the gifts to the Internal Revenue Service 
(IRS) for tax purposes. Documentation as described would lend support 
that the substantive change requirements were met.
    Another example would be an existing three-member general 
partnership comprised of a Father B and children D and E. The decision 
was made to expand the farming operation for 2009 for the inclusion of 
two newly formed limited liability companies, F and G, each of which 
are comprised of the individuals, B, D and E. The decision to expand 
the operation was based on the rental of the neighbor's farm. The 
increase in base acres held by the general partnership in 2008 and the 
amount that would be controlled in 2009 was over 50 percent.
    Previously, this would be considered a bona fide and substantive 
change in the farming operation as the addition was of cropland of at 
least 20 percent. Both of the legal entities would have been recognized 
in the farming operation for payment limitation purposes. Under the 
revised regulation, a substantive change will be considered to have 
occurred in the farming operation with the increase in base acres of at 
least 20 percent. Under the revised regulation, the bona fide and 
substantive change which occurred in the farming operation with the 
increase in base acres of more than 20 percent would initially qualify 
only one of the legal entities for payment limitation purposes. 
However, in this example, the increase in base acres was twice the 
minimum amount required. The partnership would therefore be afforded 
the opportunity to submit a written request for the increase in one 
additional person or legal entity to the farming operation. The request 
would be forwarded to the reviewing authority in the State FSA office 
designated to consider such cases. Upon review of the supporting 
documentation provided with the request, a determination would be made 
and issued accordingly.
    The entire subpart D that provided the specifics of the 3-entity 
rule is removed, and subsequent subparts redesignated. The 2008 Farm 
Bill eliminated the 3-entity rule. The removal of this subpart means 
that persons can receive payments based on ownership in an unlimited 
number of entities, until the payment limits in subpart A are reached. 
All payments will be traced

[[Page 79270]]

through four levels of ownership for direct attribution to persons.

Clarifications Made To Provide Clarity and Enforceability

    This interim rule also implements revisions to the existing 
requirements for payment eligibility and payment limitation. These 
changes are made to strengthen or clarify existing regulatory 
provisions while remaining consistent with statutory provisions, to 
provide consistency in determinations, and to simplify the 
administration of the payment eligibility and payment limitation 
provisions.
    This rule amends Sec.  1400.2, ``Administration,'' to clarify that 
eligibility determinations will be made within 60 days after the 
supporting documentation is received in the county office.
    This rule amends Sec.  1400.502 (redesignated, previously Sec.  
1400.602), ``Compliance and Enforcement,'' to require that persons and 
legal entities provide detailed supporting documentation on AGI each 
year to CCC. Previously, the regulation required this compliance 
information only when specifically required by CCC. Similarly, this 
rule amends that same section to specify that audits will be conducted 
to determine compliance, while previously the regulation specified only 
that audits may be conducted.
    This rule amends Sec.  1400.6, ``Joint and Several Liability'' 
(redesignated, previously Sec.  1400.7), to clarify possible conditions 
for release from liability. The provisions of the 2008 Farm Bill now 
extend the reach of liability for the recovery of payments to any party 
determined to have participated in a scheme or device or other equally 
serious actions for the purpose of evading the provisions of this part. 
In the event a person cooperates with the enforcement of these 
provisions, the Executive Vice President of CCC has the authority to 
partially or fully release that person from liability.

Payment Eligibility--Actively Engaged in Farming

    This rule changes the title of subpart C from ``Actively Engaged in 
Farming Determinations'' to ``Payment Eligibility.'' The general 
structure and content of this subpart remain unchanged. The 2008 Farm 
Bill requires that, in order to be eligible for payment, a person or 
legal entity be actively engaged in farming, and further defines 
``actively engaged'' as consisting of a substantial contribution of 
capital, equipment, or land and personal labor or active personal 
management. This interim rule clarifies the ``actively engaged'' 
eligibility requirements to be consistent with the 2008 Farm Bill, 
including making discretionary changes as to what constitutes a 
substantial contribution and who must make such a contribution. This 
rule provides that a contribution of active personal labor, active 
personal management, or a combination thereof, must be provided by each 
member or shareholder that has an ownership interest in an entity that 
requests program benefits and collectively, such contributions must be 
significant and commensurate. Furthermore, the contribution of active 
personal labor or active personal management of each member of 
shareholder must be made to the farming operation on a regular basis 
and must be identifiable and documentable as a separate and distinct 
contribution from that of any other member or shareholder in the 
farming operation. The 2008 Farm Bill requires a significant 
contribution of active personal labor or active personal management to 
a farming operation to qualify a person or legal entity for payment. 
Previously, significant contributions could be made by members or 
stockholders that comprised only 50 percent ownership interest in the 
entity being qualified in order to qualify all the members or 
stockholders. Previously, the active personal labor or management 
contribution for the legal entity could be made by some of the 
stockholders or members, while the remaining stockholders and members 
could make no requisite and at-risk contributions to the farming 
operation and still realize benefits indirectly through the legal 
entity.
    An example to illustrate the changes in this interim rule 
concerning what constitutes actively engaged in farming is provided 
below:
    Corporation A is held equally by stockholders B, C, D and E. 
Corporation A provides all of the capital, leases all of the equipment, 
cash rents all of the land, and hires all of the labor necessary to 
farm this land. The stockholders represent that they equally provide 
all of the active personal management necessary to successfully conduct 
this farming operation. Regular management meetings are held, either in 
person or by conference call, in which the stockholders jointly make 
all decisions concerning all financing, purchasing, planting, 
harvesting, marketing and the supervision of all hired labor in the 
farming operation.
    Previously, the corporation just described would be considered 
actively engaged in farming by the entity's contributions of capital, 
land and equipment, and the collective contribution of active personal 
management of all stockholders. The stockholders that made 
contributions to qualify the entity held more than 50 percent ownership 
interest in the entity that requested program benefits.
    With this rule, each of the stockholders in this example would be 
required to establish that their respective contribution of active 
personal management was made on a regular basis, and was identifiable 
and documentable as separate and distinct from the other stockholders 
of the entity. For example, stockholder B could represent through 
copies of signed purchase orders that stockholder B was individually 
responsible for obtaining and purchasing all inputs for the farming 
operation on behalf of the Corporation. Stockholder C could represent 
through signed contracts and delivery agreements with grain elevators 
and a cotton gin that stockholder C was individually responsible for 
the marketing of all commodities produced by the Corporation's farming 
operation. Stockholder D could represent through copies of payroll 
records that stockholder D was individually responsible for the 
supervision of all hired labor utilized by the Corporation's farming 
operation. However, if Stockholder E made no claim of management that 
is separate and distinct from the other stockholders, then as the 
result of Stockholder E's failure to meet the requirements of this 
interim rule, the payments issued to the payment entity, that being 
Corporation A, would be reduced by the interest held by Stockholder E.

Reduction or Denial of Program Payments and Benefits

    The provisions for the denial of program payments and benefits are 
expanded under the 2008 Farm Bill. Payments and benefits will be denied 
for at least two years if a person or legal entity is determined to 
have adopted a scheme or device to circumvent the payment eligibility 
and payment limitation requirements. This interim rule now provides 
additional guidance in Sec.  1400.5, ``Denial of Program Benefits'' 
(renamed, previously titled ``Scheme or Device''), on what actions are 
considered to be a scheme or device and what the indicators may be that 
a scheme is being perpetrated. Under the 2008 Farm Bill, if fraud or 
other equally serious actions are determined to exist, all parties 
involved may be ineligible for all payments and benefits under the 
programs subject to the provisions of this part for up to 5 years.
    The application of the AGI limitation requires a reduction in any 
payments or

[[Page 79271]]

benefits issued to a joint venture, general partnership or legal entity 
in an amount commensurate with the direct and indirect ownership 
interest of any person or legal entity that fails to comply with the 
respective adjusted gross income limitation eligibility standard for 
the direct receipt of such payments or benefits. Previously, ownership 
interest was tracked and reviewed to the sixth level to determine 
whether a commensurate reduction was applicable and the extent of such 
reduction. Now with the implementation of direct attribution for 
payment limitation in which ownership in legal entities is tracked 
through four levels, the ownership interest in legal entities for the 
application of the AGI limitations will also be tracked through the 
same number of levels.

Miscellaneous Minor Changes and Housekeeping

    Subparts D, ``Cash Rent Tenants,'' and E, ``Foreign Persons'' 
(redesignated, previously subparts E and F), are largely unchanged, 
except for the references to natural persons and legal entities 
discussed above and that were made throughout the part. This rule makes 
minor amendments to subpart D, ``Cash Rent Tenants,'' to clarify that 
if a cash rent tenant is a joint operation, each member must make a 
significant contribution of active personal labor or management to be 
eligible for payments. This amendment is needed to be consistent with 
other changes in this part regarding payment eligibility and with the 
2008 Farm Bill.
    This rule reorganizes part 1400, including changing the order of 
some sections, renumbering sections, and renaming some sections and 
subparts. These housekeeping changes are intended to improve 
readability and do not make substantive changes to the regulations. 
Subpart B, ``Person Determinations,'' is renamed ``Payment 
Limitation.'' Subpart C, ``Actively Engaged in Farming 
Determinations,'' is renamed ``Payment Eligibility.'' Subpart D, 
``Permitted Entities,'' is removed; subsequent subparts are renumbered. 
Throughout the part, references to ``individual(s) and entities'' are 
changed to ``person(s) and legal entities,'' consistent with the 2008 
Farm Bill requirement to attribute payments to natural persons. 
Similarly, references to 2003 through 2007 crop years are changed to 
refer to the 2009 through 2012 crop years.

       Summary of Amendments to 7 CFR Part 1400 Made by This Rule
------------------------------------------------------------------------
     Previous regulation                   Revised regulation
------------------------------------------------------------------------
Title of part 1400. Payment    Title amended to specify ``for 2009 and
 Limitation and Payment         Subsequent Crop, Program or Fiscal
 Eligibility.                   years.''
Subpart A--General provisions  Revised references to the programs for
Sec.   1400.1 Applicability..   which this regulation now applies
                                including ACRE, NAP, ELAP, LFP, LIP,
                                TAP, and applicable NRCS conservation
                                programs, and added the respective
                                payment limitations. Applicable NRCS
                                conservation programs include:
                                   Agricultural Management
                                   Assistance (AMA),
                                   Agricultural Water
                                   Enhancement Program (AWEP),
                                   Chesapeake Bay Watershed
                                   Program (CBWP),
                                   Conservation Stewardship
                                   Program (CSTP),
                                   Cooperative Conservation
                                   Partnership Initiative (CCPI),
                                   Environmental Quality
                                   Incentives Program (EQIP),
                                   Farm and Ranchland Protection
                                   Program (FRPP),
                                   Grasslands Reserve Program
                                   (GRP),
                                   Wetlands Reserve Program
                                   (WRP), and
                                   Wildlife Habitat Incentive
                                   Program (WHIP).
                               Removed the programs for which this
                                regulation no longer applies.
Sec.   1400.2 Administration.  Provided a reference point for the start
                                of the 60-day period for CCC to make
                                determinations.
                               Clarified that the 60-day time period
                                specified does not apply to the
                                completion of end of year reviews for
                                compliance.
Sec.   1400.3 Definitions....  New definitions for attribution, average
                                adjusted gross income, average adjusted
                                gross farm income, average adjusted
                                gross nonfarm income, contribution, and
                                legal entity.
                               Revised definitions for person, joint
                                operation, active personal labor, and
                                active personal management.
                               Removed definitions of entity, Indian
                                tribal ventures, permitted entity, and
                                substantial beneficial interest.
Sec.   1400.4 Indian Tribal    Title changed to Indian Tribes.
 Ventures.
                               Added that Indian tribes, as defined, are
                                exempt from all provisions of this part.
Sec.   1400.5 Scheme or        Title changed to Denial of program
 Device.                        benefits:
                               Added (1) Indicators of actions that may
                                be considered a scheme or device;
                               (2) The period of ineligibility if fraud
                                is determined;
                               (3) Producer ineligibility extends to
                                cash rent tenants; and
                               (4) Denial of benefits to all parties on
                                a pro rata basis according to ownership
                                interest.
Sec.   1400.6 Joint and        Added (1) The basis and extent of
 Several Liability.             ineligibility and payment recovery and
                               (2) Possible conditions for partial or
                                full release from liability.
                               Removed reference to individuals and
                                entities considered one ``person.''
Sec.   1400.7 Commensurate     Title changed to Commensurate
 Contributions.                 Contributions and Risk.
                               Revised reference from individuals and
                                entities to persons and legal entities.
                               Added that risk must be commensurate with
                                the claimed share of the farming
                                operation.
Sec.   1400.9 Appeals........  Revised reference from individuals and
                                entities to persons and legal entities.
1400 Subpart B Person          Renamed to Payment Limitation.
 Determinations.               Removed all references to ``person''
Sec.   1400.100 through         determinations and the timing of making
 1400.107.                      such ``person'' determinations.
                               Replaced with (1) Provisions for the
                                control and limitation of payments to
                                persons and legal entities by direct
                                attribution;
                               (2) Limitations and other restrictions
                                for payments to States, political
                                subdivisions and agencies thereof;
                               (3) New provisions applicable only to
                                spouses;

[[Page 79272]]

 
                               (4) Additional requirements for the
                                increase in persons to a farming
                                operation that are eligible for payment;
                                and
                               (5) Required information from all persons
                                and legal entities that request program
                                payments.
                               Removed sections 1400.108 and 109.
1400 Subpart C Actively        Renamed to Payment Eligibility.
 Engaged in Farming            Revised all references of individual and
 Determinations.                entity to person and legal entity.
Sec.   1400.201 through
 1400.213.
                               For uniformity, moved requirements of the
                                definitions of ``separate and distinct
                                interest'' and significant contribution
                                from Sec.   1400.3, ``Definitions,'' to
                                the applicable sections of the subpart.
                               Included additional requirements for the
                                contributions of active personal labor
                                or management by each of the
                                stockholders or members of a legal
                                entity in order for the legal entity to
                                be considered actively engaged in
                                farming.
1400 Subpart D Permitted       Renamed Subpart D Cash Rent Tenants.
 Entities.                     Removed all reference to permitted
Sec.   1400.301..............   entities and the requirements of
                                designation thereof for payment.
                               Clarified the cash rent tenant
                                requirements for joint operations and
                                entities.
                               Revised all references of individuals and
                                entities to persons and legal entities.
                               Redesignated from Sec.   1400.401.
1400 Subpart E Cash Rent       Redesignated Subpart E to Subpart D.
 Tenants.                      Redesignated Sec.   1400.401 to 1400.301.
Sec.   1400.401..............
1400 Subpart F Foreign         Redesignated Subpart F to Subpart E.
 Persons.                      Redesignated Sec.  Sec.   1400.501
Sec.  Sec.   1400.501 through   through 1400.502 to Sec.  Sec.
 1400.502.                      1400.401 through 1400.402.
                               Revised all references of individuals and
                                entities to persons and legal entities;
                                included revised standards for active
                                personal labor in the definition of
                                substantial contribution of active
                                personal labor.
1400 Subpart G Average         Redesignated Subpart G to Subpart F.
 Adjusted Gross Income.        Redesignated Sec.  Sec.   1400.600
Sec.   1400.600 through         through 1400.603 to Sec.  Sec.
 1400.603.                      1400.500 through 1400.503.
                               Revised (1) All references of individuals
                                and entities to persons and legal
                                entities;
                               (2) All references of 2003 through 2007
                                years of applicability to 2009 through
                                2012;
                               (3) All references of the $2.5 million
                                limitation to the three limitations--2
                                for commodity programs and one for
                                conservation programs; and
                               (4) The reference and application of the
                                test for farm income from 75 percent to
                                not less than 66.66 percent.
                               Included the revisions (1) The definition
                                and sources of income from farming,
                                ranching, forestry and related
                                activities and
                               (2) Ownership interest in entities will
                                be tracked through only four levels,
                                rather than six, for consistency with
                                the same number of levels as for direct
                                attribution of payments.
------------------------------------------------------------------------

Notice and Comment

    Section 1601 of the 2008 Farm Bill requires that these amendments 
be issued through an interim rule for the 2009 and subsequent crop, 
fiscal, or program years. This rule is effective on publication, but 
subject to modification after the consideration of comments. CCC will 
consider comments received during the comment period for this interim 
rule, which ends January 28, 2009. After the comment period closes, CCC 
will publish another document in the Federal Register. The document 
will include a discussion of any comments received during the comment 
period and any amendments made to the rule as a result of the comments.

Executive Order 12866

    The Office of Management and Budget (OMB) designated this interim 
rule as significant under Executive Order 12866. A cost-benefit 
assessment is summarized below and is available from the contact listed 
above.

Summary of Economic Impacts

    The 2008 Farm Bill makes significant changes in how USDA will 
administer payment limits and determine who is eligible for payments. 
Those changes will be implemented beginning with the 2009 crop, fiscal, 
or program year, as applicable. The most fundamental change in how 
payment limits are to be administered is that each member or owner of 
farming entities will be assigned a limit. The payment limits that 
applied to the entities themselves under the 2002 Farm Bill are 
retained. The motivation for this change is twofold:
    (1) Increase transparency by allocating payments made to farming 
entities to their members.
    (2) Moderate payments by adding another layer of payment limits. 
For example, the 2008 Farm Bill maintains payment limits on the 
corporations themselves and adds additional limits on the owners of 
farming corporations.
    USDA will be required to track payments made to entities, such as 
farming corporations, to the owners of those entities. Such tracking is 
called direct attribution. Both entities and their owners will now have 
payment limits. Direct attribution will involve extensive USDA staff 
resources, and consequently cost, in the implementation phase and has 
the potential for some reduction in Government outlays. Reductions in 
outlays will diminish as farmers reorganize their operations in order 
to capture the highest possible payments. Due to uncertainty about the 
costs it is difficult to estimate annual impacts.
    Other changes made in this interim rule are expected to result in 
little changes to Government outlays.

Regulatory Flexibility Act

    This rule is not subject to the Regulatory Flexibility Act since 
CCC is not required to publish a notice of proposed rulemaking for this 
rule. CCC is authorized by section 1601 of the 2008 Farm Bill to issue 
an interim rule effective on publication with an opportunity for 
comment.

[[Page 79273]]

Environmental Assessment

    The environmental impacts of this final rule have been considered 
in a manner consistent with the provisions of the National 
Environmental Policy Act (NEPA), 42 U.S.C. 4321-4347, the regulations 
of the Council on Environmental Quality (40 CFR Parts 1500-1508), and 
FSA's regulations for compliance with NEPA (7 CFR part 799). The 
changes to Payment Limitation and Payment Eligibility, required by the 
2008 Farm Bill that are identified in this rule, are non-discretionary. 
Therefore, FSA has determined that NEPA does not apply to this rule and 
no environmental assessment or environmental impact statement will be 
prepared.

Executive Order 12372

    This program is not subject to Executive Order 12372, which 
requires consultation with State and local officials. See the notice 
related to 7 CFR part 3015, subpart V, published in the Federal 
Register on June 24, 1983 (48 FR 29115).

Executive Order 12988

    The interim rule has been reviewed in accordance with Executive 
Order 12988. This rule is not retroactive and does not preempt State or 
local laws, regulations, or policies unless they present an 
irreconcilable conflict with this rule. Before any judicial action may 
be brought concerning the provisions of this rule the administrative 
appeal provisions of 7 CFR parts 11 and 780 must be exhausted.

Executive Order 13132

    The policies contained in this rule do not have any substantial 
direct effect on States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on State and local 
governments. Therefore, consultation with the States is not required.

Executive Order 13175

    The policies contained in this rule do not impose substantial 
unreimbursed direct compliance costs on Indian tribal governments or 
have tribal implications that preempt tribal law.

Unfunded Mandates

    This rule contains no Federal mandates under the regulatory 
provisions of Title II of the Unfunded Mandates Reform Act of 1995 
(UMRA) for State, local or tribal governments, or the private sector. 
In addition, CCC is not required to publish a notice of proposed 
rulemaking for this rule. Therefore, this rule is not subject to the 
requirements of sections 202 and 205 of UMRA.

Federal Assistance Programs

    The title and number of the Federal assistance programs in the 
Catalog of Federal Domestic Assistance to which this interim rule 
applies are:

10.055--Direct and Counter-Cyclical Payments Program.
10.069--Conservation Reserve Program.
10.072--Wetlands Reserve Program.
10.082--Tree Assistance Program.
10.912--Environmental Quality Incentives Program.
10.914--Wildlife Habitat Incentive Program.
10.917--Agricultural Management Assistance.
10.918--Ground and Surface Water Conservation--Environmental Quality 
Incentives Program.
10.920--Grassland Reserve Program.

    This interim rule also applies to the following Federal assistance 
programs that are not in the Catalog of Federal Domestic Assistance:
     ACRE,
     ELAP,
     LFP,
     LIP,
     SURE,
     AWEP,
     CBWP,
     CSTP,
     CCPI, and
     FRPP.

Paperwork Reduction Act

    The regulations in this rule are exempt from the requirements of 
the Paperwork Reduction Act (44 U.S.C. Chapter 35), as specified in 
section 1601(c)(2) of the 2008 Farm Bill, which provides that these 
regulations be promulgated and the programs administered without regard 
to the Paperwork Reduction Act.

E-Government Act Compliance

    CCC is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.

List of Subjects in CFR Part 1400

    Agriculture, Loan programs--agriculture, Conservation, Price 
support programs.

0
For the reasons discussed above, this rule revises 7 CFR part 1400 to 
read as follows:

PART 1400--PAYMENT LIMITATION AND PAYMENT ELIGIBILITY FOR 2009 AND 
SUBSEQUENT CROP, PROGRAM, OR FISCAL YEARS

Subpart A--General Provisions
Sec.
1400.1 Applicability.
1400.2 Administration.
1400.3 Definitions.
1400.4 Indian Tribe.
1400.5 Denial of program benefits.
1400.6 Joint and several liability.
1400.7 Commensurate contributions and risk.
1400.8 Equitable treatment.
1400.9 Appeals.
Subpart B--Payment Limitation
1400.100 Revocable trust.
1400.101 Minor children.
1400.102 States, political subdivisions, agencies thereof.
1400.103 Charitable organizations.
1400.104 Changes in farming operations.
1400.105 Attribution of payments.
1400.106 Payment limits.
1400.107 Notification of interests.
Subpart C--Payment Eligibility
1400.201 General provisions for determining whether a person or 
legal entity is actively engaged in farming.
1400.202 Persons.
1400.203 Joint operations.
1400.204 Limited partnerships, limited liability partnerships, 
limited liability companies, corporations and other similar legal 
entities.
1400.205 Trusts.
1400.206 Estates.
1400.207 Landowners.
1400.208 Family members.
1400.209 Sharecroppers.
1400.210 Deceased and incapacitated persons.
1400.211 Persons and legal entities not considered to be actively 
engaged in farming.
1400.212 Growers of hybrid seed.
1400.213 Military personnel.
Subpart D--Cash Rent Tenants
1400.301 Eligibility.
Subpart E--Foreign Persons
1400.401 Eligibility.
1400.402 Notification.
Subpart F--Average Adjusted Gross Income Limitation
1400.500 Applicability.
1400.501 Determination of average adjusted gross income.
1400.502 Compliance and enforcement.
1400.503 Commensurate reduction.

    Authority: 7 U.S.C. 1308, 1308-1, 1308-2, 1308-3, 1308-3a, 1308-
4, and 1308-5.

Subpart A--General Provisions


Sec.  1400.1  Applicability.

    (a) This part, except as otherwise noted, is applicable to all of 
the following programs and any other

[[Page 79274]]

programs as provided in individual program regulations in this chapter 
(including, but not limited to, all price support programs in parts 
1421 and 1434 of this chapter):
    (1) The Direct and Counter-cyclical Program (DCP), including the 
Average Crop Revenue Election (ACRE), part 1412 of this chapter;
    (2) The Conservation Reserve Program (CRP), part 1410 of this 
chapter;
    (3) The Noninsured Crop Disaster Assistance Program (NAP), part 
1437 of this chapter;
    (4) The Supplemental Revenue Assistance Program (SURE), part 1480 
of this chapter;
    (5) The Livestock Forage Disaster Program (LFP), Livestock 
Indemnity Program (LIP), and the Emergency Assistance Program for 
Livestock, Honey Bees and Farm-raised Fish (ELAP), part 1439 of this 
chapter;
    (6) The Tree Assistance Program (TAP), part 783 of this title; and
    (7) The Natural Resource Conservation Service (NRCS) conservation 
programs of this title including Agricultural Management Assistance 
(AMA), Agricultural Water Enhancement Program (AWEP), Chesapeake Bay 
Watershed Program (CBWP), Conservation Stewardship Program (CSTP), 
Cooperative Conservation Partnership Initiative (CCPI), Environmental 
Quality Incentives Program (EQIP), Farm and Ranchland Protection 
Program (FRPP), Grasslands Reserve Program (GRP), Wetlands Reserve 
Program (WRP), and Wildlife Habitat Incentive Program (WHIP).
    (b) This part will apply to the programs specified in:
    (1) Paragraphs (a)(1), (3), (4), and (6) of this section on a crop 
year basis;
    (2) To the program in paragraph (a)(2) of this section on a fiscal 
year basis;
    (3) To the programs in paragraph (a)(5) of this section on a 
calendar year basis; and
    (4) To the programs in paragraph (a)(7) of this section based on 
available funding.
    (c) This part will be used to determine the manner in which 
payments will be attributed to persons and legal entities for the 
payment limitations provided in this section and to other programs as 
provided in individual program regulations in this chapter.
    (d) Where more than one provision of this part may apply, the 
provision which is most restrictive on the program participant will be 
applied.
    (e) The payment limitations of this part are not applicable to:
    (1) Payments made under State conservation reserve enhancement 
program agreements approved by the Secretary and
    (2) Payments made subject to this part if ownership interest in 
land or a commodity is transferred as the result of the death of a 
program participant and the new owner of the land or commodity has 
succeeded to the contract of the prior owner. If the successor is 
otherwise eligible, payments cannot exceed the amount the previous 
owner was entitled to receive at the time of death.
    (f) The following amounts are the limitations on payments per 
person or legal entity for the applicable period for each payment or 
benefit.

------------------------------------------------------------------------
                                                  Limitation per person
                                                   or legal entity, per
               Payment or benefit                   crop, program, or
                                                       fiscal year
------------------------------------------------------------------------
(1) Direct Payments for covered commodities \1\                  $40,000
(2) Direct Payments for peanuts \1\............                   40,000
(3) CRP annual rental payments \2\.............                   50,000
(4) GRP........................................                   50,000
(5) WHIP.......................................                   50,000
(6) WRP........................................                   50,000
(7) Counter-Cyclical Payments for covered                         65,000
 commodities \3\...............................
(8) Counter-Cyclical Payments for peanuts \3\..                   65,000
(9) NAP payments...............................                  100,000
(10) Supplemental Agricultural Disaster                          100,000
 Assistance \4\................................
(11) TAP.......................................                  100,000
(12) CSTP \5\..................................                  200,000
(13) EQIP......................................                  300,000
------------------------------------------------------------------------
\1\ If the person or legal entity has a direct or indirect interest in
  payments earned on a farm that is in ACRE, this limitation will
  reflect a 20 percent reduction in direct payments on each farm that is
  participating in ACRE.
\2\ Limitation applicable only to CRP contracts approved prior to
  October 1, 2008.
\3\ Under ACRE, this amount will be a combined limitation for counter-
  cyclical and ACRE payments. If a person or legal entity has a direct
  or indirect interest in payments earned on a farm that is
  participating in ACRE, this limitation will reflect an increase for
  the amount that the direct payments were reduced.
\4\ Total payments received under Supplemental Agricultural Disaster
  Assistance through SURE, LIP, LFP, and ELAP may not exceed $100,000.
\5\ The $200,000 limit is the total limit for 2009 through 2012. Note:
  AMA, AWEP, CBWP, CCPI, and FRPP are all limited by available funding
  rather then an amount by participant.

    (g) With respect to contracts for conservation programs approved 
prior to October 1, 2008, the payment limitation rules in 7 CFR part 
1400 in effect on September 30, 2008 will be applicable (see 7 CFR part 
1400, revised as of January 1, 2008).


Sec.  1400.2  Administration.

    (a) The regulations in this part will be administered under the 
general supervision and direction of the Executive Vice President, 
Commodity Credit Corporation (CCC), and the Administrator, Farm Service 
Agency (FSA). In the field, the regulations in this part will be 
administered by the FSA State and county committees (referred to as 
``State committee'' and ``county committee,'' respectively).
    (b) State executive directors, county executive directors, and 
State and county committees do not have authority to modify or waive 
any of the provisions of this part.
    (c) The State committee may take any action authorized or required 
by this part to be taken by the county committee that has not been 
taken by such committee. The State committee may also:
    (1) Correct or require a county committee to correct any action 
taken by such county committee that is not in accordance with this part 
or
    (2) Require a county committee to withhold taking any action that 
is not in accordance with this part.

[[Page 79275]]

    (d) No delegation in this part to a State or county committee 
precludes the Executive Vice President, CCC, and the Administrator, 
FSA, or a designee, from determining any question arising under this 
part or from reversing or modifying any determination made by a State 
or county committee.
    (e) Benefits from programs subject to this part may not be issued 
until all required forms and necessary payment eligibility and payment 
limitation determinations are made.
    (f) The initial payment eligibility determinations will be made 
within 60 days after the required forms and any other supporting 
documentation needed in making such determinations are received in the 
county FSA office. If the determination is not made within 60 days, the 
producer will receive a determination for that program year that 
reflects the determination sought by the producer unless the Deputy 
Administrator determines that the producer did not follow the farm 
operating plan that was presented to the county or State committee for 
such year.
    (g) Initial determinations concerning the provisions of this part 
will not be made by a county FSA office with respect to any farm 
operating plan that is for a joint operation with six or more members.
    (h) Reviews of farming operations and corresponding documentation 
submitted by program participants may be conducted at any time to 
determine compliance with applicable statutes and regulations. The 
completion of such reviews is not subject to the time constraints 
specified in paragraph (f) of this section.


Sec.  1400.3  Definitions.

    (a) The terms defined in part 718 of this title are applicable to 
this part and all documents issued in accordance with this part, except 
as otherwise provided in this section.
    (b) The following definitions are also applicable to this part:
    Active personal labor means personally providing physical 
activities necessary in a farming operation, including activities 
involved in land preparation, planting, cultivating, harvesting, and 
marketing of agricultural commodities in the farming operation. Other 
physical activities include those physical activities required to 
establish and maintain conserving cover crops on CRP acreages and those 
physical activities necessary in livestock operations.
    Active personal management means personally providing and 
participating in:
    (1) The general supervision and direction of activities and labor 
involved in the farming operation; or
    (2) Services (whether performed on-site or off-site) reasonably 
related and necessary to the farming operation, including:
    (i) Supervision of activities necessary in the farming operation, 
including activities involved in land preparation, planting, 
cultivating, harvesting, and marketing of agricultural commodities, as 
well as activities required to establish and maintain conserving cover 
crops on CRP acreage and activities required in livestock operations;
    (ii) Business-related actions, which include discretionary decision 
making;
    (iii) Evaluation of the financial condition and needs of the 
farming operation;
    (iv) Assistance in the structuring or preparation of financial 
reports or analyses for the farming operation;
    (v) Consultations in or structuring of business-related financing 
arrangements for the farming operation;
    (vi) Marketing and promotion of agricultural commodities produced 
by the farming operation;
    (vii) Acquiring technical information used in the farming 
operation; and
    (viii) Any other management function reasonably necessary to 
conduct the farming operation and for which service the farming 
operation would ordinarily be charged a fee.
    Administrator means the Administrator of the Farm Service Agency 
including any designee of the Administrator.
    Alien means any person not a citizen or national of the United 
States.
    Attribution means the combination of any payment made directly to a 
person or legal entity with the person's or legal entity's pro rata 
direct and indirect interest in payments received by a legal entity, 
joint venture, or general partnership.
    Average Adjusted Gross Farm Income means the average of the portion 
of adjusted gross income of the person or legal entity that is 
attributable to activities related to farming, ranching, or forestry 
for the 3 taxable years preceding the most immediately preceding 
complete taxable year.
    Average Adjusted Gross Income means the average of the adjusted 
gross income as defined under 26 U.S.C. 62 or comparable measure of the 
person or legal entity over the 3 taxable years preceding the most 
immediately preceding complete taxable year.
    Average Adjusted Gross Nonfarm Income means the difference between 
the average adjusted gross income for the person or legal entity and 
the average adjusted gross farm income for the person or legal entity.
    Capital means the funding provided by a person or legal entity to 
the farming operation, independent and separate from all other farming 
operations, in order for such operation to conduct farming activities. 
In determining whether a person or legal entity has independently 
contributed capital, in the form of funding, to the farming operation, 
such capital must have been derived from a fund or account separate and 
distinct from that of any other person or legal entity involved in such 
operation. Capital does not include the value of any labor or 
management that is contributed to the farming operation or any outlays 
for land or equipment. A capital contribution must be a direct out-of-
pocket input of a specified sum or an amount borrowed by the person or 
legal entity and does not include advance program payments.
    Chief means the Chief of the Natural Resources Conservation Service 
including any designee of the Chief (also referred to in this part as 
NRCS Chief).
    Contribution means providing land, capital, or equipment assets, 
and the actions of providing active personal labor or active personal 
management to a farming operation in exchange for, or with the 
expectation of, deriving benefit based solely on the success of the 
farming operation.
    Deputy Administrator means the Deputy Administrator for Farm 
Programs, Farm Service Agency including any designee.
    Equipment means the machinery and implements needed by the farming 
operation to conduct activities of the farming operation, including 
machinery and implements involved in land preparation, planting, 
cultivating, harvesting, or marketing of the crops involved. Equipment 
also includes machinery and implements needed to establish and maintain 
conserving cover crops on CRP acreages and those needed to conduct 
livestock operations. Such equipment may be leased from any source. If 
such equipment is leased from another person or legal entity with an 
interest in the farming operation, such equipment must be leased at a 
fair market value.
    Family member means a person to whom another member in the farming 
operation is related as a lineal ancestor, lineal descendant, sibling, 
spouse, or otherwise by marriage.
    Farming operation means a business enterprise engaged in the 
production of agricultural products, commodities, or livestock, 
operated by a person, legal entity, or joint operation that is eligible

[[Page 79276]]

to receive payments, directly or indirectly, under one or more of the 
programs specified in Sec.  1400.1. A person or legal entity may have 
more than one farming operation if such person or legal entity is a 
member of one or more joint operations.
    Indian tribe means any Indian tribe, band, nation, pueblo, or other 
organized group or community, including any Alaska Native village or 
regional or village corporation as defined in or established pursuant 
to the Alaska Native Claims Settlement Act (43 U.S.C. 1601-1629h), 
which is recognized as eligible for special programs and services 
provided by the United States to Indians because of their status as 
Indians.
    Interest in a farming operation means one of the following:
    (1) Owner or renter of the land in the farming operation;
    (2) An interest in the agricultural products, commodities, or 
livestock produced by the farming operation; or
    (3) A member of a joint operation that either owns or rents land in 
the farming operation or has an interest in the agricultural products, 
commodities, or livestock produced by the farming operation.
    Irrevocable trust means a trust as specified in this definition. 
Any trust not meeting this definition will be considered a revocable 
trust. A trust may be considered to be an irrevocable trust only if:
    (1) The trust cannot be modified or terminated by the grantor;
    (2) The grantor has no future, contingent, or remainder interest in 
the corpus of the trust; and
    (3) The trust agreement does not provide for the transfer of the 
corpus of the trust to the remainder beneficiary in less than 20 years 
from the date the trust is established except in cases where the 
transfer is contingent upon either the remainder beneficiary achieving 
at least the age of majority or the death of the grantor or income 
beneficiary.
    Joint operation means a general partnership, joint venture, or 
other similar business organization in which the members are jointly 
and severally liable for the obligations of the organization.
    Land means farmland that meets the specific requirements of the 
applicable program. Such land may be leased from any source. If such 
land is leased from another person or legal entity with an interest in 
the crop or crop proceeds, such land must be leased at a fair market 
value.
    Lawful alien means any person who is not a citizen or national of 
the United States but who is admitted into the United States for 
permanent residence under the Immigration and Nationality Act and 
possesses a valid Alien Registration Receipt Card issued by the United 
States Citizenship and Immigration Services, Department of Homeland 
Security.
    Legal entity means an entity created under Federal or State law and 
that:
    (1) Owns land or an agricultural commodity, product, or livestock; 
or
    (2) Produces an agricultural commodity, product, or livestock.
    Payment means:
    (1) Payments made in accordance with part 1412 or successor 
regulation of this chapter;
    (2) CRP annual rental payments made in accordance with part 1410 or 
successor regulation of this chapter;
    (3) NAP payments made in accordance with part 1437 or successor 
regulation of this chapter; and
    (4) For other programs, any payments designated in individual 
program regulations in this chapter.
    Person means an individual, natural person and does not include a 
legal entity.
    Public school means a primary, elementary, secondary school, 
college, or university that is directly administered under the 
authority of a governmental body or that receives a predominant amount 
of its financing from public funds.
    Secretary means the Secretary of the United States Department of 
Agriculture.
    Sharecropper means a person who performs work in connection with 
the production of the crop under the supervision of the operator and 
who receives a share of such crop in return for the provision of such 
labor.
    Significant contribution means the provision of the following to a 
farming operation:
    (1)(i) For land, capital, or equipment contributed independently by 
a person or legal entity, a contribution that has a value at least 
equal to 50 percent of the person's or legal entity's commensurate 
share of the total:
    (A) Value of the capital necessary to conduct the farming 
operation;
    (B) Rental value of the land necessary to conduct the farming 
operation; or
    (C) Rental value of the equipment necessary to conduct the farming 
operation; or
    (ii) If the contribution by a person or legal entity consists of 
any combination of land, capital, and equipment, such combined 
contribution must have a value at least equal to 30 percent of the 
person's or legal entity's commensurate share of the total value of the 
farming operation;
    (2) For active personal labor, an amount contributed by a person to 
the farming operation that is described by the smaller of the 
following:
    (i) 1,000 hours per calendar year; or
    (ii) 50 percent of the total hours that would be necessary to 
conduct a farming operation that is comparable in size to such person's 
or legal entity's commensurate share in the farming operation;
    (3) With respect to active personal management, activities that are 
critical to the profitability of the farming operation, taking into 
consideration the person's or legal entity's commensurate share in the 
farming operation; and
    (4) With respect to a combination of active personal labor and 
active personal management, when neither contribution by itself meets 
the requirement of paragraphs (2) and (3) of this definition, a 
combination of active personal labor and active personal management 
that, when made together, results in a critical impact on the 
profitability of the farming operation in an amount at least equal to 
either the significant contribution of active personal labor or active 
personal management as defined in paragraphs (2) and (3) of this 
definition.
    Substantial amount of active personal labor means the provision of 
active personal labor to a farming operation in an amount described by 
the smaller of the following:
    (1) 1,000 hours per calendar year; or
    (2) 50 percent of the total hours that would be necessary to 
conduct a farming operation that is comparable in size to the person's 
or legal entity's commensurate share in the farming operation.
    Total value of the farming operation means the total of the costs, 
excluding the value of active personal labor and active personal 
management contributed by a person who is a member of the farming 
operation, needed to carry out the farming operation for the year for 
which the determination is made.


Sec.  1400.4  Indian Tribe.

    Provisions of this part do not apply to Indian tribes as defined in 
Sec.  1400.3.


Sec.  1400.5  Denial of program benefits.

    (a) All or any part of a payment otherwise due a person or legal 
entity on all farms in which the person or legal entity has an interest 
may be withheld or be required to be refunded if the person or legal 
entity fails to comply with the provisions of this part.
    (b) All or any part of a payment otherwise due a person or legal 
entity on all farms in which the person or legal entity has an interest 
may be withheld

[[Page 79277]]

or be required to be refunded if the person or legal entity fails to 
comply with the provisions of this part and adopts or participates in 
adopting a scheme or device designed to evade this part, or that has 
the effect of evading this part. Such acts may include, but are not 
limited to:
    (1) Concealing information that affects the application of this 
part;
    (2) Submitting false or erroneous information; or
    (3) Creating a business arrangement using rental agreements and 
other arrangements to conceal the interest of a person or legal entity 
in a farm or farming operation for the purpose of obtaining program 
payments the person or legal entity would otherwise not be eligible to 
receive. Indicators of such business arrangement include, but are not 
limited to the following:
    (i) No crops are grown or agricultural commodities produced by the 
represented operation;
    (ii) The represented operation has no appreciable assets;
    (iii) The only source of capital for the operation is the program 
payments; or
    (iv) The represented operation exists only for the receipt of 
program payments.
    (c) If the Deputy Administrator determines that a person or legal 
entity has adopted a scheme or device to evade, or that has the purpose 
of evading, the provisions of 7 U.S.C. 1308, 1308-1, or 1308-3, as 
amended, such person or legal entity will be ineligible to receive 
payments under the programs specified in Sec.  1400.1 in the year for 
such scheme or device was adopted and the succeeding year.
    (d) A person or legal entity that perpetuates a fraud, commits 
fraud, or participates in equally serious actions for the benefit of 
the person or legal entity, or the benefit of any other person or legal 
entity, to exceed the applicable limit on payments or the requirements 
of this part will be subject to a five-year denial of all program 
benefits. Such other equally serious actions may include, but are not 
limited to:
    (1) Knowingly engaged in, or aided in the creation of a fraudulent 
document;
    (2) Failed to disclose material information relevant to the 
administration of the provisions of this part, or
    (3) Any other actions of a person or legal entity determined by the 
Deputy Administrator as designed or intended to circumvent the 
provisions of this subpart.
    (e) Program payments and benefits will be denied on pro-rata basis:
    (1) In accordance to the interest held by the person or legal 
entity in any other legal entity or joint operations and
    (2) To any person or legal entity that is a cash rent tenant on 
land owned or under control of a person or legal entity for which a 
determination of this section has been made.


Sec.  1400.6  Joint and several liability.

    (a) Any legal entity, including joint ventures and general 
partnerships, and any member of a legal entity determined to have 
knowingly participated in a scheme or device, or other such equally 
serious actions to evade the payment limitation provisions, or that has 
the purpose of evading the provisions of this part, will be jointly and 
severally liable for any amounts determined to be payable as the result 
of the scheme or device, or other such equally serious actions, 
including amounts necessary to recover the payments.
    (b) Any person or legal entity that cooperates in the enforcement 
of the payment limitation and payment eligibility provisions of this 
part may be partially or fully released from liability, as determined 
by the Executive Vice President, CCC.
    (c) The provisions of this section will be applicable in addition 
to any liability that arises under a criminal or civil statute.


Sec.  1400.7  Commensurate contributions and risk.

    (a) In order to be considered eligible to receive payments under 
the programs specified in Sec.  1400.1, a person or legal entity 
specified in Sec. Sec.  1400.202 through 1400.210 must have:
    (1) A share of the profits or losses from the farming operation 
commensurate with the person's or legal entity's contribution(s) to the 
operation;
    (2) Contribution(s) to the farming operation that are at risk for a 
loss; and
    (3) Risk that is commensurate with the person's or legal entity's 
claimed share of the farming operation.
    (b) [Reserved]


Sec.  1400.8  Equitable treatment.

    (a) Actions taken by a person or legal entity in good faith based 
on action or advice of an authorized representative of the 
Administrator may be accepted as meeting the requirements of this part 
to the extent the Administrator deems necessary to provide fair and 
equitable treatment to such person or legal entity.
    (b) Actions taken by a person or legal entity in good faith based 
on action or advice of an authorized representative of the NRCS Chief 
may be accepted as meeting the requirements of this part to the extent 
the NRCS Chief deems necessary to provide fair and equitable treatment 
to such person or legal entity.


Sec.  1400.9  Appeals.

    (a) A person or legal entity may obtain reconsideration and review 
of determinations made under this part in accordance with the appeal 
regulations set forth in part 780 of this title. With respect to such 
appeals, the applicable reviewing authority will:
    (1) Schedule a hearing with respect to the appeal within 45 days 
following receipt of the written appeal and
    (2) Issue a determination within 60 days following the hearing.
    (b) The time limitations provided in paragraph (a) will not apply 
if:
    (1) The appellant, or the appellant's representative, requests a 
postponement of the scheduled hearing;
    (2) The appellant, or the appellant's representative, requests 
additional time following the hearing to present additional information 
or a written closing statement;
    (3) The appellant has not timely presented information to the 
reviewing authority; or
    (4) An investigation by the Office of Inspector General is ongoing 
or a court proceeding is involved that affects the amount of payments a 
person may receive.
    (c) If the deadlines provided in paragraphs (a) and (b) of this 
section are not met, the relief sought by the producer's appeal will be 
granted for the applicable crop year unless the Deputy Administrator 
determines that the producer did not follow the farm operating plan 
initially presented to the county committee for the year that is the 
subject of the appeal.
    (d) An appellant may waive the provisions of paragraphs (a) and (b) 
of this section.

Subpart B--Payment Limitation


Sec.  1400.100  Revocable trust.

    A revocable trust and the grantor of the trust will be considered 
to be the same person.


Sec.  1400.101  Minor children.

    (a) Except as provided in paragraph (b) of this section, payments 
received by a child under 18 years of age as of April 1 of the 
applicable crop, program, or fiscal year, including such a person who 
is the beneficiary of a trust or who is an heir of an estate, will be 
attributed for the entire crop, program, or fiscal year to the parent 
receiving the greater amount of program payments subject to this part 
or to any court-appointed person such as a guardian or conservator who 
is responsible for the minor.

[[Page 79278]]

    (b) Payments received by a minor will not be attributed to the 
minor's parent or to any court-appointed person such as a guardian or 
conservator who is responsible for the minor if all of the following 
apply:
    (1) The minor is a producer on a farm and the minor's parents or 
any court-appointed person such as guardian or conservator who is 
responsible for the minor, does not have any interest in the farm;
    (2) The minor has established and maintains a separate household 
from the minor's parents or any court-appointed person such as a 
guardian or conservator who is responsible for the minor, and such 
minor personally carries out the farming activities with respect to the 
minor's farming operation for which there is a separate accounting; and
    (3) The minor does not live in the same household as such minor's 
parents and:
    (i) Is represented by a court-appointed guardian or conservator who 
is responsible for the minor and
    (ii) Ownership of the farm is vested in the minor.
    (c) A person will be considered to be a minor until the age 18 is 
reached. Court proceedings conferring majority on a person under 18 
years of age will not change such person's status as a minor.


Sec.  1400.102  States, political subdivisions, and agencies thereof.

    (a) A State, political subdivision, and agency thereof, is not 
eligible for payments or benefits under programs specified in Sec.  
1400.1, unless the exception provided in paragraph (b) of this section 
applies.
    (b) Subject to the limitation in paragraph (c) of this section, a 
State, political subdivision, and any agency thereof, may receive 
payments or benefits under programs specified in Sec.  1400.1 if both 
of the following apply:
    (1) The land for which payments are received is owned by the State, 
political subdivision, or agency thereof and
    (2) The payments are used solely for the support of public schools;
    (c) The total payments described in paragraph (b) of this section 
cannot exceed $500,000 annually except with respect to payments made 
with respect to the following States: Alaska, Delaware, Hawaii, Idaho, 
Maine, Montana, North Dakota, New Hampshire, Rhode Island, South 
Dakota, Vermont, and Wyoming. The list of States that meet the criteria 
in paragraph (c) of this section may change due to changes in 
population of any State.


Sec.  1400.103  Charitable organizations.

    (a) A charitable organization, including a club, society, fraternal 
organization, or religious organization will be considered a separate 
legal entity for payment limitation purposes to the extent that such an 
entity is independently engaged in the production of crops, 
agricultural commodities, or livestock, except where the land or the 
proceeds from the farming operation may transfer to a legal entity that 
exercises control or authority over such organization.
    (b) If the land or the proceeds from the farming operation may 
transfer to a legal entity that exercises control or authority over the 
charitable organization, payments to the charitable organization will 
be attributed to the parent organization.


Sec.  1400.104  Changes in farming operations.

    (a) Any change in a farming operation that would increase the 
number of persons or legal entities to which the provisions of this 
part apply must be bona fide and substantive. If bona fide, the 
following will be considered to be a substantive change in the farming 
operation:
    (1) The addition of a family member to a farming operation in 
accordance with Sec.  1400.208, except that such an addition will not 
affect the status of any other person or legal entity that is added to 
the farming operation;
    (2) With respect to a landowner only, a change from a cash rent to 
a share rent;
    (3) An increase through the acquisition of base acres not 
previously involved in the farming operation of at least 20 percent or 
more in the total base acres involved in the farming operation.
    (i) For the purpose of payment limitations, such an increase in 
base acres will be considered an applicable bona fide and substantive 
change for the increase of only one person or legal entity to the 
farming operation, unless;
    (ii) A representative of the State FSA office determines, based on 
the magnitude and complexity of the change represented, the increase in 
base acres supports additional persons or legal entities to the farming 
operation.
    (4) A change in ownership by sale or gift of equipment from a 
person or legal entity previously engaged in a farming operation to a 
person or legal entity that has not been involved in such operation. 
The sale or gift of equipment will be considered to be bona fide and 
substantive only if:
    (i) The transferred amount of such equipment is commensurate with 
the new person's or legal entity's share of the farming operation,
    (ii) The sale or gift of the equipment was based on the equipment's 
fair market value,
    (iii) The former owner of the equipment has no control over such 
equipment,
    (iv) The transaction was not financed by the former owner, and
    (v) Preference was not given to the former owner to re-purchase the 
equipment at a later date.
    (5) A change in ownership by sale or gift of land from a person or 
legal entity who previously has been engaged in a farming operation to 
a person or legal entity that has not been involved in such operation. 
The sale or gift of land will be considered to be bona fide and 
substantive only if:
    (i) The transferred amount of such land is commensurate with the 
new person's or legal entity's share of the farming operation,
    (ii) The sale or gift of land was based on the land's fair market 
value,
    (iii) The former owner of the land has no control over such land,
    (iv) The transaction was not financed by the former owner, and
    (v) Preference was not given to the former owner to re-purchase the 
land at a later date.
    (b) Unless the requirements in paragraph (a) of this section are 
met, the increase in persons or legal entities in the farming operation 
will not be recognized for payment limitation purposes and the 
additional persons or legal entities are not eligible for program 
payment identified in Sec.  1400.1 otherwise resulting from the farming 
operation.


Sec.  1400.105  Attribution of payments.

    (a) A payment made directly to a person or legal entity will be 
combined with the pro rata interest of the person or legal entity in 
payments received by a legal entity in which the person or legal entity 
has a direct or indirect ownership interest, unless the payments of the 
legal entity have been reduced by the pro rata share of the person or 
legal entity.
    (b) A payment made to a legal entity will be attributed to those 
persons who have a direct and indirect ownership interest in the legal 
entity, unless the payment of the legal entity has been reduced by the 
pro rata share of the person.
    (c) Attribution of payments made to legal entities will be tracked 
through four levels of ownership in legal entities as follows:
    (1) First level of ownership--any payment made to a legal entity 
that is owned in whole or in part by a person will be attributed to the 
person in an

[[Page 79279]]

amount that represents the direct ownership interest in the first-tier 
or payment legal entity;
    (2)(i) Second level of ownership--any payment made to a first-tier 
legal entity that is owned in whole or in part by another legal entity 
(referred to as a second-tier legal entity) will be attributed to the 
second-tier legal entity in proportion to the ownership of the second-
tier legal entity in the first-tier legal entity;
    (ii) If the second-tier legal entity is owned in whole or in part 
by a person, the amount of the payment made to the first-tier legal 
entity will be attributed to the person in the amount that represents 
the indirect ownership in the first-tier legal entity by the person.
    (3) Third and fourth levels--except as provided in paragraph 
(2)(ii) of this section, any payments made to a legal entity at the 
third and fourth tiers of ownership will be attributed in the same 
manner as specified in paragraph (2)(i) of this section.
    (4) Fourth-tier ownership--if the fourth-tier of ownership is that 
of a legal entity and not that of a person, a reduction in payment will 
be applied to the first-tier or payment legal entity in the amount that 
represents the indirect ownership in the first-tier or payment legal 
entity by the fourth-tier legal entity.
    (d) For purposes of administering direct attribution, and to 
determine a person's or legal entity's ownership interest in a legal 
entity that receives a payment subject to limitation; the ownership 
interest on June 1 of each year will be used.
    (e) Direct attribution of payments is not applicable to a 
cooperative association of producers with respect to commodities 
produced by the members of the association that are marketed by the 
association on behalf of the members of the association. The payments 
will instead be attributed to the producers as persons.


Sec.  1400.106  Payment limits.

    (a) Payments made to a person or legal entity will not exceed the 
amounts specified in subpart A of this part.
    (b) Payments made to a joint venture or general partnership cannot 
exceed, for each payment specified in subpart A of this part, the 
amount determined by multiplying the maximum payment amount specified 
in subpart A of this part by the number of persons and legal entities, 
other than joint ventures and general partnerships, that comprise the 
ownership of the joint venture or general partnership.
    (c) Payments made to a legal entity will be reduced proportionately 
by an amount that represents the direct or indirect ownership in the 
legal entity by any person or legal entity that has otherwise reached 
the applicable maximum payment limitation.


Sec.  1400.107  Notification of interests.

    (a) In order to be eligible to receive any payment specified in 
subpart A of this part, or any other program as provided in individual 
program regulations in this chapter, a person or legal entity must, 
provide information in the manner as prescribed by the Deputy 
Administrator.
    (b) The information required to be submitted under paragraph (a) of 
this section must include:
    (1) The name and social security number of each person, or the name 
and taxpayer identification number of each legal entity, that holds or 
acquires an ownership interest in the legal entity and
    (2) The name and taxpayer identification number of each legal 
entity in which the person or legal entity holds an ownership interest.

Subpart C--Payment Eligibility


Sec.  1400.201  General provisions for determining whether a person or 
legal entity is actively engaged in farming.

    (a) To be considered eligible to receive payments with respect to a 
particular farming operation, a person or legal entity must be actively 
engaged in farming with respect to such operation.
    (b) Actively engaged in farming means, except as otherwise provided 
in this part, that the person or legal entity:
    (1) Independently and separately makes a significant contribution 
to a farming operation of:
    (i) Capital, equipment, or land, or a combination of capital, 
equipment, or land and
    (ii) Active personal labor or active personal management, or a 
combination of active personal labor and active personal management;
    (2) Has a share of the profits or losses from the farming operation 
commensurate with the person's or legal entity's contributions to the 
operation; and
    (3) Makes contributions to the farming operation that are at risk 
for a loss, with the level of risk being commensurate with the person's 
or legal entity's claimed share of the farming operation.
    (c) All of the following factors will be taken into consideration 
in determining if the person or legal entity is independently and 
separately contributing a significant amount of capital, equipment, or 
land, or a combination of capital, equipment, or land, to the farming 
operation:
    (1) A separate and distinct interest in the land, crop, and 
livestock involved in the farming operation;
    (2) The demonstration of separate and total responsibility for the 
interest in the land, crop, and livestock in the farming operation; and
    (3) All funds and business accounts of the farming operation are 
separate from that of any other person and legal entity.
    (d) In determining if the person or legal entity is independently 
and separately contributing a significant amount of active personal 
labor or active personal management, all of the following factors will 
be taken into consideration:
    (1) The types of crops and livestock produced by the farming 
operation;
    (2) The normal and customary farming practices of the area;
    (3) The total amount of labor and management necessary for such a 
farming operation in the area; and
    (4) Whether the person or legal entity receives compensation for 
the labor and management activities.


Sec.  1400.202  Persons.

    (a) A person will be considered to be actively engaged in farming 
with respect to a farming operation if:
    (1) The person independently and separately makes a significant 
contribution to a farming operation of:
    (i) Capital, equipment, or land, or a combination of capital, 
equipment, or land and
    (ii) Active personal labor or active personal management, or a 
combination of active personal labor and active personal management;
    (2) Has a share of the profits or losses from the farming operation 
commensurate with the person's or legal entity's contributions to the 
operation; and
    (3) Makes contributions to the farming operation that are at risk 
for a loss, with the level of risk being commensurate with the person's 
or legal entity's claimed share of the farming operation.
    (b) If one spouse, or an estate of a deceased spouse, is determined 
to be actively engaged in farming as specified in paragraph (a) of this 
section, the other spouse is considered to have made a significant 
contribution, as specified in paragraph (a)(1)(ii) of this section, 
only to the same farming operation.
    (c) If a farming operation is conducted by a person, and the 
capital, land, or equipment is contributed by the person, such capital, 
land, or equipment:
    (1) Must be contributed directly by the person and must not be 
acquired as a result of a loan made to, guaranteed, co-signed, or 
secured by:

[[Page 79280]]

    (i) Any other person, joint operation, or legal entity that has an 
interest in such farming operation;
    (ii) Such person, joint operation, or legal entity by any other 
person, joint operation, or legal entity that has an interest in such 
farming operation or
    (iii) Any other person, joint operation, or legal entity in whose 
farming operation such person, joint operation, or legal entity has an 
interest; and
    (2) If acquired as a loan made to, guaranteed, co-signed, or 
secured by the persons, joint operations, or legal entities, the loan 
must:
    (i) Bear the prevailing interest rate and
    (ii) Have a repayment schedule considered reasonable and customary 
for the area.


Sec.  1400.203  Joint operations.

    (a) A member of a joint operation will be considered to be actively 
engaged in farming with respect to a farming operation if the member:
    (1) Makes a significant contribution of:
    (i) Capital, equipment, or land or a combination of capital, 
equipment, or land and
    (ii) Active personal labor or active personal management, or a 
combination of active personal labor and active personal management, 
and that are:
    (A) Performed on a regular basis,
    (B) Identifiable and documentable, and
    (C) Separate and distinct from such contributions of any other 
member of the farming operation;
    (2) Has a share of the profits or losses from the farming operation 
commensurate with the member's contributions to the operation; and
    (3) Makes contributions to the farming operation that are at risk 
for a loss, with the level of risk being commensurate with the member's 
claimed share of the farming operation.
    (b) For a farming operation conducted by a joint operation in which 
the capital, land, or equipment is contributed by such joint operation, 
such capital, land, or equipment:
    (1) Must be contributed directly by the joint operation and must 
not be acquired as a loan made to, guaranteed, co-signed, or secured 
by:
    (i) Any person, legal entity, or other joint operation that has an 
interest in such farming operation, including either joint operation's 
members;
    (ii) Such joint operation by any person, legal entity, or other 
joint operation that has an interest in such farming operation; or
    (iii) Any person, legal entity, or other joint operation in whose 
farming operation such joint operation has an interest, and
    (2) If acquired as a result of a loan made to, guaranteed, co-
signed, or secured by the persons, legal entities, or joint operations 
with an interest in the operation as defined, the loan must:
    (i) Bear the prevailing interest rate and
    (ii) Have a repayment schedule considered reasonable and customary 
for the area.
    (c) If a joint operation separately makes a significant 
contribution of capital, equipment, or land, or a combination of 
capital, equipment, or land, and the joint operation meets the 
provisions of Sec.  1400.201(b)(2) and (b)(3), the members of the joint 
operation who make a significant contribution of active personal labor, 
active personal management, or a combination of active personal labor 
and active personal management to the farming operation as specified in 
paragraph (a)(1)(ii) of this section will be considered to be actively 
engaged in farming with respect to such farming operation.


Sec.  1400.204  Limited partnerships, limited liability partnerships, 
limited liability companies, corporations, and other similar legal 
entities.

    (a) A limited partnership, limited liability partnership, limited 
liability company, corporation, or other similar legal entity will be 
considered to be actively engaged in farming with respect to a farming 
operation if:
    (1) The legal entity independently and separately makes a 
significant contribution to the farming operation of capital, 
equipment, or land, or a combination of capital, equipment, or land;
    (2) Each partner, stockholder, or member with an ownership interest 
makes a contribution, whether compensated or not compensated, of active 
personal labor, active personal management, or a combination of active 
personal labor and active personal management to the farming operation; 
that are:
    (i) Performed on a regular basis;
    (ii) Identifiable and documentable; and
    (iii) Separate and distinct from such contributions of any other 
partner, stockholder or member of the farming operation;
    (3) The contribution of the partners, stockholders and members is 
significant and commensurate;
    (4) The legal entity has a share of the profits or losses from the 
farming operation commensurate with the legal entity's contributions to 
the operation; and
    (5) The legal entity makes contributions to the farming operation 
that are at risk for a loss, with the level of risk being commensurate 
with the legal entity's claimed share of the farming operation.
    (b) If any partner, stockholder, or member fails to meet the 
requirements in paragraph (a)(2) of this section, any program payment 
and benefit subject to this subpart provided to the legal entity will 
be reduced by an amount commensurate with the ownership share held by 
that partner, stockholder, or member in the legal entity.
    (c) For a farming operation conducted by a legal entity in which 
the capital, land, or equipment is contributed by the legal entity, 
such capital, land, or equipment:
    (1) Must be contributed directly by the legal entity and must not 
be acquired as a loan made to, guaranteed, co-signed, or secured by:
    (i) Any person, legal entity, or joint operation that has an 
interest in such farming operation, including the legal entity's 
members;
    (ii) Such joint operation by any person, legal entity, or other 
joint operation that has an interest in such farming operation; or
    (iii) Any person, legal entity, or joint operation in whose farming 
operation such legal entity has an interest, and
    (2) If acquired as a result of a loan made to, guaranteed, co-
signed, or secured by the persons, legal entities, or joint operations 
as defined, the loan must:
    (i) Bear the prevailing interest rate and
    (ii) Have a repayment schedule considered reasonable and customary 
for the area.


Sec.  1400.205  Trusts.

    A trust will be considered to be actively engaged in farming with 
respect to a farming operation if:
    (a) The trust independently and separately makes a significant 
contribution to the farming operation of capital, equipment, or land, 
or a combination of capital, equipment, or land;
    (b) The income beneficiaries collectively make a significant 
contribution of active personal labor or active personal management, or 
a combination of active personal labor and active personal management 
to the farming operation. The combined interest of all the income 
beneficiaries providing active personal labor or active personal 
management, or a combination of active personal labor and active 
personal management, must be at least 50 percent;

[[Page 79281]]

    (c) The trust has a share of the profits or losses from the farming 
operation commensurate with the legal entity's contributions to the 
operation;
    (d) The trust makes contributions to the farming operation that are 
at risk for a loss, with the level of risk being commensurate with the 
legal entity's claimed share of the farming operation;
    (e) The trust has provided a tax identification number of the trust 
unless the trust is a revocable trust and the grantor is the sole 
income beneficiary; and
    (f) The trust has provided a copy of the trust agreement to the 
county committee unless the trust is a revocable trust.


Sec.  1400.206  Estates.

    (a) For 2 program years after the program year in which a person 
dies, the person's estate will be considered to be actively engaged in 
farming if:
    (1) The estate, as a legal entity, makes a significant contribution 
of either:
    (i) Capital, equipment, or land or
    (ii) A combination of capital, equipment, or land; and
    (2) The personal representative or heirs of the estate collectively 
make a significant contribution of either:
    (i) Active personal labor or active personal management or
    (ii) The combination of active personal labor and active personal 
management; and
    (3) The estate has a share of the profits or losses from the 
farming operation commensurate with the legal entity's contributions to 
the operation;
    (4) The estate makes contributions to the farming operation that 
are at risk for a loss, with the level of risk being commensurate with 
the legal entity's claimed share of the farming operation; and
    (5) The representative of the estate has provided a tax 
identification number for the estate and a copy of a court order, will, 
or other legal document that identifies the heir(s) and tax 
identification number(s) of the heir(s).
    (b) After the period set forth in paragraph (a) of this section, 
the deceased person's estate will not be considered to be actively 
engaged in farming unless, on a case by case basis, the Deputy 
Administrator determines, for the purpose of obtaining program 
payments, that the estate has not been settled.


Sec.  1400.207  Landowners.

    (a) A person or legal entity that is a landowner, including 
landowners with an undivided interest in land, making a significant 
contribution of owned land to the farming operation, will be considered 
to be actively engaged in farming with respect to such owned land, if 
the landowner:
    (1) Receives rent or income for such use of the land based on the 
land's production or the operation's operating results;
    (2) Has a share of the profits or losses from the farming operation 
commensurate with the landowner's contributions to the operation; and
    (3) Makes contributions to the farming operation that are at risk 
for a loss, with the level of risk being commensurate with the 
landowner's claimed share of the farming operation.
    (b) A landowner also includes a member of a joint operation if the 
joint operation holds title to land in the name of the joint operation 
and if the joint operation or its members submit adequate documentation 
to determine that, upon dissolution of the joint operation, the title 
to the land owned by the joint operation will revert to such member of 
such joint operation.


Sec.  1400.208  Family members.

    (a) Notwithstanding the provisions of Sec. Sec.  1400.201 through 
1400.206, with respect to a farming operation conducted by persons, a 
majority of whom are family members, an adult family member who makes a 
significant contribution of active personal labor, active personal 
management, or a combination of active personal labor and active 
personal management will be considered to be actively engaged in 
farming if the adult family member meets the provisions in paragraph 
(b) of this section.
    (b) An adult family member who elects to be considered actively 
engaged in farming under this section must:
    (1) Have a share of the profits or losses from the farming 
operation commensurate with such person's contributions to the 
operation and
    (2) Make contributions to the farming operation that are at risk 
for a loss, with the level of risk being commensurate with such 
person's claimed share of the farming operation.


Sec.  1400.209  Sharecroppers.

    (a) Notwithstanding the provisions of Sec. Sec.  1400.201 through 
1400.206 of this part, with respect to a person who is a sharecropper, 
such person will be considered to be actively engaged in farming if the 
sharecropper meets the provisions of paragraph (b) of this section.
    (b) A sharecropper who elects to be considered actively engaged in 
farming under this section must:
    (1) Make a significant contribution of active personal labor to the 
farming operation;
    (2) Have a share of the profits or losses from the farming 
operation commensurate with such person's contribution to the 
operation; and
    (3) Make a contribution to the farming operation that is at risk 
for a loss, with the level of risk being commensurate with such 
person's claimed share of the farming operation.


Sec.  1400.210  Deceased and incapacitated persons.

    If the person dies or is incapacitated before a determination is 
made that the person is ``actively engaged in farming,'' the 
representative of the deceased person's estate or the incapacitated 
person, or other person if necessary, must provide the determining 
authority information to verify that such person did make a conscious 
effort to and would have been determined to be actively engaged in 
farming if not for the person's death or incapacitation. If the person 
dies or is incapacitated after being determined to be ``actively 
engaged in farming,'' the determining authority will allow such 
determination to be in effect for that program year or fiscal year, as 
applicable. However, the following year such person or the person's 
estate must meet all necessary requirements in order to be determined 
to be ``actively engaged in farming'' for that year.


Sec.  1400.211  Persons and legal entities not considered to be 
actively engaged in farming.

    Any person or legal entity that does not satisfy all of the 
applicable provisions of Sec. Sec.  1400.201 through 1400.210 and a 
landowner who rents land to a farming operation for cash or a crop 
share guaranteed as to the amount of the commodity will not be 
considered to be actively engaged in farming with respect to the 
farming operation.


Sec.  1400.212  Growers of hybrid seed.

    The existence of a hybrid seed contract for a person or legal 
entity will not be taken into account when making an actively engaged 
in farming determination with respect to such person or legal entity. 
However, such person or legal entity must satisfy all other applicable 
provisions of this part.


Sec.  1400.213  Military personnel.

    If a person is called to active duty in the military before a 
determination is made that the person is actively engaged in farming, 
the person may be considered to be actively engaged in farming if the 
determining authority determines that such person did make a conscious 
effort to, and would have been determined to be, actively engaged

[[Page 79282]]

in farming if the person would not have been called to active duty. If 
the person is called to active duty after being determined to be 
actively engaged in farming, such determination will remain in effect 
for the program year.

Subpart D--Cash Rent Tenants


Sec.  1400.301  Eligibility.

    (a) Any tenant that is actively engaged in farming in accordance 
with the provisions of subpart C and conducts a farming operation in 
which the tenant rents the land for cash, for a crop share guaranteed 
as to the amount of the commodity, or by any arrangement in which the 
tenant does not compensate the landlord by cash or a crop share, and 
receives benefits, with respect to such land under a program specified 
in Sec.  1400.1(a)(1) and (2) will not be eligible to receive any 
payment with respect to such cash-rented land unless the tenant 
independently makes a significant contribution to the farming operation 
of:
    (1) Active personal labor or
    (2) Significant contributions of both active personal management 
and equipment.
    (b) If the equipment is leased by the tenant from:
    (1) The landlord, then the lease must reflect the fair market value 
of the equipment leased with a payment schedule considered reasonable 
and customary for the area or
    (2) The same person or legal entity that is providing hired labor 
to the farming operation, then the contracts for the lease of the 
equipment and for the hired labor must be two separate contracts.
    (c) If the equipment is leased by the tenant from the landlord, or 
from the same person or legal entity that is providing hired labor to 
the farming operation, then the tenant must exercise complete control 
over the leased equipment during the entire current crop year. Complete 
control is defined as exclusive access and use by the tenant.
    (d) If the cash rent tenant is a joint operation, then each member 
must make a significant contribution of active personal labor or active 
personal management as specified in Sec.  1400.203(a)(1)(ii) to be 
considered eligible for the member's share of the program payments 
received by the joint operation on the cash rented land.
    (e) If the cash rent tenant is a legal entity, then a significant 
contribution of active personal labor or active personal management 
must be made to the legal entity as specified in Sec.  1400.204(a)(2) 
for the legal entity to be considered eligible for the program payments 
on the cash rented land.

Subpart E--Foreign Persons


Sec.  1400.401  Eligibility.

    (a) Any person who is not a citizen of the United States or a 
lawful alien will be ineligible to receive payments, loans, and 
benefits, with respect to any commodity produced, or land set aside 
from production, on a farm that is owned or operated by such person 
unless such person is providing land, capital, and a substantial amount 
of active personal labor on such farm.
    (b)(1) A corporation or other legal entity will be ineligible to 
receive payments, loans, and benefits if more than 10 percent of the 
ownership of the legal entity is held by persons who are not citizens 
of the United States or lawful aliens unless each foreign person who is 
a stockholder or other type of member provides a substantial amount of 
active personal labor in the production of crops on a farm owned or 
operated by such a legal entity. However, upon the written request of 
the legal entity, the Deputy Administrator may make payments in an 
amount determined by the Deputy Administrator to be representative of 
the percentage interest of the legal entity that is owned by citizens 
of the United States and lawful aliens or foreign stockholders or other 
type of member who provide a significant contribution of active 
personal labor in the production of crops on a farm owned or operated 
by such legal entity.
    (2) In determining whether more than 10 percent of the ownership of 
a legal entity is held by persons who are not citizens of the United 
States or by lawful aliens, the ownership interest will be the higher 
of the amount of such interest on:
    (i) The date the applicable program contract or agreement is 
executed by the legal entity or
    (ii) Any other date prior to the final harvest date that is 
determined and announced by the Deputy Administrator to be normal in 
the area for the applicable program crop.
    (3) A corporation or other legal entity must inform the county 
committee of any increase in such ownership that occurs after the 
applicable program contract or agreement is executed.
    (4) In the event of an increase in such ownership after a payment, 
loan, or benefit has been made, the legal entity will refund such 
payment, loan, or benefit.
    (5) Where there is only one class of stock or other similar unit of 
ownership, a person's or legal entity's percentage share of the limited 
partnership, corporation, or other similar legal entity will be based 
upon the outstanding shares of stock or other similar unit of ownership 
held by the person or legal entity as compared to the total outstanding 
shares of stock or other similar unit of ownership. If the limited 
partnership, corporation, or other similar legal entity has more than 
one class of stock or other unit of ownership, the percentage share of 
the limited partnership, corporation or other similar legal entity 
owned by a person or legal entity will be determined by the Deputy 
Administrator on the basis of market quotations. If market quotations 
are unavailable or so infrequent that they do not represent fair market 
value, such percentage share will be determined by the Deputy 
Administrator on the basis of all relevant factors affecting the fair 
market value of such stock or other unit of ownership, including the 
various rights and privileges that are attributed to each such class.
    (c) A citizen of the United States, lawful alien, or legal entity 
that is not subject to this part who is in lawful possession, through a 
lease or otherwise, of a farm owned by a person or legal entity who is 
subject to this part may receive a payment, loan, and benefit without 
regard to this part.


Sec.  1400.402  Notification.

    (a) Any legal entity, whether foreign or domestic, that executes a 
program contract or agreement under which a payment, loan, or benefit 
may be available must provide written notification to the county 
committee in the county where the legal entity conducts its farming 
operation if:
    (1) Any person, group of persons, legal entity, or group of legal 
entities holds more than a 10 percent interest in such legal entity; 
and
    (2) Such person, group of persons, legal entity, or group of legal 
entities, in accordance with Sec.  1400.401, are ineligible to receive 
a payment, loan, or benefit.
    (b) Such written notification must include the name and social 
security number or taxpayer identification number of such a person or 
legal entity, if known, and of all persons and legal entities that hold 
an interest in the legal entity.
    (c) The failure of the legal entity to provide this information 
will result in the ineligibility of the legal entity to receive any 
payment, loan, or benefit.

[[Page 79283]]

Subpart F--Average Adjusted Gross Income Limitation


Sec.  1400.500  Applicability.

    (a) For the 2009 through 2012 crop, program, or fiscal years, a 
person or legal entity, other than a joint venture or general 
partnership, will not be eligible to receive, directly or indirectly, 
certain program payments or benefits described in Sec.  1400.1 if the 
average adjusted gross income of the person or legal entity exceeds the 
amounts in paragraphs (b) through (d) of this section for the 3 taxable 
years preceding the most immediately preceding complete taxable year, 
as determined by the Deputy Administrator.
    (b) For 2009 through 2012 commodity programs set forth in Sec.  
1400.1, a person or legal entity with an average adjusted gross nonfarm 
income as defined in Sec.  1400.3 that exceeds $500,000 will not be 
eligible to receive program payments or benefits as identified in Sec.  
1400.1.
    (c) For 2009 through 2012 commodity programs set forth in Sec.  
1400.1, a person or legal entity that has an average adjusted gross 
farm income as defined in Sec.  1400.3 that exceeds $750,000 will not 
be eligible to receive a direct payment and other payments made 
applicable by statute or regulation.
    (d) For 2009 through 2012 conservation programs set forth in Sec.  
1400.1, a person or legal entity that has an average adjusted gross 
nonfarm income as defined in Sec.  1400.3 that exceeds $1,000,000 will 
not be eligible to receive payments or benefits under conservation and 
related programs, and other programs made applicable by statute or 
regulation, unless:
    (1) Not less than 66.66 percent of the of the average adjusted 
gross income of the person or legal entity is average adjusted gross 
farm income or
    (2) This limitation may be waived on a case-by-case basis by the 
Administrator or NRCS Chief for the protection of environmentally 
sensitive land of special significance. Such a written waiver request 
must document that land within or adjacent to the producer's 
agricultural operation contains critical resources such as, but not 
limited to, threatened, endangered, or at-risk species; historical or 
cultural resources; unique wetlands; or critical groundwater recharge 
areas. In addition, the waiver request must either:
    (i) Show that use of conservation program funding by an individual 
producer is critical to the success of a project that benefits multiple 
producers in a community, watershed, or other geographic area or
    (ii) Achieve enduring conservation treatment through use of a long-
term agreement that is greater than 15 years in duration or through use 
of a deed restriction on the land.
    (e) Determinations made under this subpart with regard to 
conservation programs will be based on the year for which the 
conservation program contract or agreement is approved and the 
determination will apply for the entire term of the subject agreement 
or contract.
    (f) Vendors that receive payment for technical services provided in 
conjunction with programs made subject to this subpart by regulation or 
statute, but who are not beneficiaries of the program, are not subject 
to this subpart for services that are of the type that are also 
performed by the Federal Government in connection with such programs.
    (g) Payments to an escrow agent, or other legal entity of similar 
capacity in which the recipient is maintaining temporary custody of the 
funds for eventual disbursement to an eligible program participant, are 
not subject to this subpart so long as the party ultimately receiving 
the payment is eligible under this subpart.
    (h) Payments to States, counties, political subdivisions and 
agencies thereof, and Indian tribes as defined in Sec.  1400.3 are not 
subject to this subpart.


Sec.  1400.501  Determination of average adjusted gross income.

    (a) Except as otherwise provided in this subpart, average adjusted 
gross farm income of a person or legal entity includes income or 
benefits derived from or related to the following:
    (1) Production of crops, specialty crops, and unfinished raw 
forestry products;
    (2) The production of livestock, including but not limited to, 
cattle, elk, reindeer, bison, horses, deer, sheep, goats, swine, 
poultry, fish and other aquaculture products used for food, honeybees, 
and products produced by, or derived from, livestock;
    (3) The production of farm-based renewable energy;
    (4) The sale, including the sale of easements and development 
rights, of farm, ranch, forestry land, water or hunting rights, or 
environmental benefits;
    (5) The rental or lease of land or equipment, used for farming, 
ranching, or forestry operations, including water or hunting rights;
    (6) The processing, packing, storing, shedding, and transporting of 
farm, ranch, and forestry commodities, including renewable energy;
    (7) The feeding, rearing, or finishing of livestock;
    (8) The sale of land that has been used for agriculture;
    (9) Any payment or benefit, including benefits from risk management 
practices, crop insurance indemnities, and catastrophic risk protection 
plans;
    (10) Payments and benefits authorized under any program made 
applicable to this subpart by statute or regulation;
    (11) Any other activity related to farming, ranching, or forestry, 
as determined by the Deputy Administrator; and,
    (12) Any income reported on the Schedule F or other schedule used 
by the person or legal entity to report income from farming, ranching, 
or forestry operations to the Internal Revenue Service.
    (b) For the specific purpose of determining the average adjusted 
gross farm income under Sec.  1400.500(d)(1), and in addition to Sec.  
1400.501(a), the average adjusted gross farm income of a person or 
legal entity includes income or benefits derived from the following:
    (1) The sale of equipment to conduct farm, ranch, or forestry 
operations and
    (2) The provision of production inputs and services to farmers, 
ranchers, foresters, and farm operations.
    (c) Except as otherwise provided in this subpart, adjusted gross 
income means:
    (1) For a person filing a separate tax return, the amount reported 
as ``adjusted gross income'' on the final federal income tax return for 
the person for the applicable tax year;
    (2) For a person filing a joint tax return, the amount reported as 
``adjusted gross income'' on the final federal income tax return for 
the applicable tax year unless a certified statement is provided by a 
certified public accountant or attorney specifying the manner in which 
such income would have been declared and reported if the persons had 
filed two separate returns and that this calculation is consistent with 
the information supporting the filed joint return;
    (3) For a corporation, including a subchapter S corporation, the 
total reported ``taxable income'' as reported to the Internal Revenue 
Service plus the amount of the charitable contributions as reported on 
the final federal income tax return for the applicable tax year;
    (4) For a tax exempt legal entity, the ``unrelated business taxable 
income'' of the legal entity as reported to the Internal Revenue 
Service on the final federal income tax return, less any other income 
CCC determines to be from non-commercial activities;
    (5) For a limited liability company, limited partnership, limited 
liability partnership, or similar type of

[[Page 79284]]

organization, the income from trade or business activities plus the 
amount of guaranteed payments to the members as reported to the 
Internal Revenue Service on the final federal income tax return for the 
applicable tax year; and
    (6) For an estate or trust, the adjusted total income plus 
charitable deductions as reported to the Internal Revenue Service on 
the final federal income tax return for the applicable tax year, or the 
amount of net increase in the estate's or trust's value resulting from 
its business or investment interests.
    (d) For purposes of applying this subpart and calculating the 3-
year average referenced in Sec.  1400.500, that average will be for the 
adjusted gross income for the 3 taxable years preceding the most 
immediately preceding complete taxable year, as determined by CCC. For 
a legal entity that is not required to file a federal income tax 
return, or a person or legal entity that did not have taxable income in 
one or more tax years, the average will be the adjusted gross income, 
including losses, averaged for the 3 taxable years preceding the most 
immediately preceding complete taxable year, as determined by CCC. A 
new legal entity will have its adjusted gross income averaged only for 
those years of the base period for which it was in business; however, a 
new legal entity will not be considered ``new'' to the extent it takes 
over an existing operation and has any elements of common ownership or 
interests with the preceding legal entity, or with persons or legal 
entities with an interest in the ``old'' legal entity. When there is 
such commonality, income of the ``old'' legal entity will be averaged 
with that of the ``new'' legal entity for the base period.


Sec.  1400.502  Compliance and enforcement.

    (a) To comply with the average adjusted gross income limitation, a 
person or legal entity, including all interest holders in a legal 
entity, general partnership, or joint venture, must provide annually 
the following as required by CCC:
    (1) A certification in the manner prescribed by CCC from a 
certified public accountant or attorney that the average adjusted gross 
income of the person or legal entity does not exceed the applicable 
limitation;
    (2) A certification from the person or legal entity that the 
average adjusted gross income of the person or legal entity does not 
exceed the applicable adjusted gross income limitations;
    (3) The relevant Internal Revenue Service documents and supporting 
financial data as requested by CCC. Supporting financial data may 
include State income tax returns, financial statements, balance sheets, 
reports prepared for or provided to another Government agency, 
information prepared for a private lender, and other credible 
information relating to the amount and source of the person's or legal 
entity's income; or
    (4) Authorization for CCC to obtain tax data from the Internal 
Revenue Service for purposes of verification of compliance with this 
subpart.
    (b)(1) All persons and legal entities are subject to an audit by 
FSA of any information submitted in accordance with this subpart. As a 
part of this audit, income tax returns may be requested, and if 
requested, must be supplied by all related persons and legal entities.
    (2) In addition to any other requirement under any Federal statute, 
relevant Federal income tax returns and documentation must be retained 
a minimum of two years after the end of the calendar year corresponding 
to the year for which payments or benefits are requested.
    (c) Failure to provide necessary and accurate information to verify 
compliance, or failure to comply with this subpart's requirements, will 
result in ineligibility for all program benefits subject to this 
subpart for the year or years subject to the request.


Sec.  1400.503  Commensurate reduction.

    (a) Any program payment or benefit subject to this subpart provided 
to a legal entity, general partnership, or joint venture will be 
reduced by an amount commensurate with the direct and indirect 
ownership interest in the legal entity, general partnership, or joint 
venture of each person or legal entity determined to have an average 
adjusted gross income in excess of the applicable limitation under the 
standards provided elsewhere in this subpart for the direct recipient 
of such payments.
    (b) Ownership interest in a legal entity will be reviewed to the 
fourth level of ownership, as specified in Sec.  1400.105, to determine 
whether a commensurate reduction is applicable and the extent of such 
reduction. If an ownership interest is not held by a person in the 
fourth level of ownership in a legal entity, no payment or benefit will 
be made with respect to such interest.

    Signed in Washington, DC, on December 19, 2008.
Glen L. Keppy,
Acting Executive Vice President, Commodity Credit Corporation.
[FR Doc. E8-30764 Filed 12-23-08; 11:15 am]
BILLING CODE 3410-05-P