The U.S. Department of Agriculture is partnering with the Internal Revenue Service (IRS) to reduce fraud in farm programs and streamline payment limits for family farmers, according to Val Dolcini, state executive director of the Farm Service Agency (FSA) in California.
The actions are intended to strengthen the integrity and defensibility of USDA farm safety net programs and help the agricultural industry to meet requirements included in the 2008 farm bill.
"This cooperative partnership will ensure that the producers who depend upon the safety net of USDA programs will have future access to these programs by enhancing the overall integrity of the programs," Dolcini said. "It will also provide more flexibility for family farm operations across the country."
USDA has finalized a “Memorandum of Understanding” with the IRS to establish an electronic information exchange process for verifying compliance with the adjusted gross income provisions for programs administered by USDA's FSA and Natural Resources Conservation Service (NRCS).
The agreement will ensure that payments are not issued to producers whose adjusted gross income (AGI) exceeds certain limits. The limits set in the 2008 farm bill are $500,000 non-farm average for commodity and disaster programs; $750,000 farm average AGI for direct payments; and $1 million non-farm average AGI for conservation programs.
The USDA-IRS electronic process reviews data from tax returns, performs a series of calculations, and compares the values to the AGI limitations from the 2008 farm bill. FSA and NRCS will receive a record that indicates whether or not the program participant appears to meet the income limits.
Written consent will be required from each producer or payment recipient for this process. No actual tax data will be included in the report that IRS sends to USDA. As part of the review and evaluation process, participants whose AGI may exceed the limits will be offered an opportunity to provide third party verification or other information to validate their income.
Beginning with the 2010 program year, USDA has amended the rules that govern the requirements to be “actively engaged” in farming. The rules apply to eligibility for payments under the Direct and Counter-cyclical Program (DCP) or Average Crop Revenue Election (ACRE) program administered by the FSA.
USDA has implemented the following change to permit certain operations, most often family-run operations, to meet “actively engaged” in farming requirements under less restrictive rules.
Every stockholder or member of a legal entity, including a corporation, does not have to contribute labor or management if both of the following apply:
• At least half of the interest in the legal entity is held by stockholders or members who are providing active personal labor or active personal management that altogether qualifies as a significant contribution to the farming operation;
• The total direct payments received, directly and indirectly, by the legal entity and each of the members does not exceed $40,000.