Farm Bill and Farmer Income Caps

OMAHA (DTN) -- The House and Senate plans for the farm bill go in opposite directions when it comes to eligibility for farm program payments.

In an effort to curb both wealthy investors and absentee landlords, farmers with adjusted gross incomes (AGI) above $700,000 would see their access to commodity program payments restricted under a farm bill proposal being pitched by the chairwoman of the Senate Agriculture Committee.

Under the House proposal, farmers with incomes higher than $900,000 would be eligible for payments if at least 75% of their income is derived from farming, ranching or forestry. That falls more in line with recent ad-hoc disaster programs for farmers.

The House Agriculture Committee is preparing for a May 23 meeting to mark up its version of the farm bill. Chairman GT Thompson, R-Pa., released an overview of his bill, though it has fewer specific details than the framework released by Sen. Debbie Stabenow, D-Mich., chairwoman of the Senate Agriculture Committee. Stabenow's framework released section-by-section summaries for her proposal.

Stabenow's commodity title updates reference prices used for Agricultural Risk Coverage and Price Loss Coverage (ARC and PLC).

Stabenow's plan also would lower the current $900,000 AGI rule that dates back to the 2014 farm bill. Commodities payments are restricted for farmers on land owned by individuals or legal entities with an average AGI above $700,000. The Senate language is meant to "discourage further investor purchases, which would restrict, for the first time, wealthy investors and absentee landlords from benefiting from farm safety net programs intended to support active farmers who are taking the risk and producing the crops."

Adjusted gross income measures net income after farm operating expenses are deducted. The 2014 farm bill set a $900,000 AGI limit -- based on the average AGI of three prior taxable years. The provision also allows married couples filing joint tax returns to divide the AGI between spouses.

The AGI provision is used for both commodity and conservation programs, as well as disaster assistance.

Since 2018, multiple ad-hoc aid packages to farmers from USDA and Congress have waived the $900,000 AGI limit for farmers if at least 75% of their income came from farming, ranching or forestry. Lawmakers from both parties in states such as California have complained the AGI excludes large specialty crop or livestock producers from receiving aid after major natural disasters hit.

In an email to DTN, a spokesman for the House Agriculture Committee pointed to two bipartisan bills, HR 4127, the "Fair Access to Agriculture Disaster Programs Act," and HR 4800, the "Growing Access to Environmental Sustainability Act" or GATES Act. Both bills expand payment eligibility for disaster and conservation programs and are incorporated in the House bill.

"Rather than further limiting eligibility for producers, the House Farm Bill will draw on great bipartisan proposals put forward regarding AGI, such as HR 4800 and 4127," Ag Chairman Thompson stated to DTN in an email. "I want to thank the dozens of cosponsors on both sides of the aisle for their leadership in ensuring fair access to critical programs for farmers, ranchers and orchardists across the country."

USDA's Ag Census does not release reports detailing farm payments based on farmers' AGI. The 2022 Ag Census showed there were 59,898 farms with more than $1 million in sales that received nearly $4.3 billion in government payments. There were 7,642 farms reporting more than $5 million in sales that also collectively received $887 million in government payments.

Commenting on Stabenow's plan, the National Sustainable Agriculture Coalition (NSAC), which mainly lobbies for smaller family farms, stated the framework language "closes loopholes to actively engaged requirements and strengthens the means test for commodity program payment eligibility from $900,000 to $700,000 to ensure taxpayer dollars benefit working farmers, not absent landowners."

Both the House and Senate proposals run counter to the conservative House Republican Study Committee (RSC) proposed budget released earlier this year. The GOP group, which has roughly 190 members, including 21 members of the House Ag Committee, proposed limiting farm payments for ARC and PLC to farmers with adjusted gross incomes under $500,000. "This was a policy proposed in the FY 2021 Trump budget and would ensure that commodity support payments are going to smaller farms that may struggle to obtain capital from private lenders," the RSC stated last month.

Other groups, such as the American Farm Bureau Federation, have policy language that opposes means testing for farm program payments.

"This year's crop will be the most expensive ever planted and harvested because of rising inflation and means testing program participation would hurt many farm families who rely on the farm safety net," said Joe Gilson, director of government affairs for AFBF.

Gilson added there are "many concepts" in Stabenow's framework that align with AFBF policy, "but there are also a number of concepts that we need more details on that we're concerned could diminish a farm's ability to stay in business. As we have previously said, the details are important. We urge both Senate and House Agriculture Committees to move to a markup so we can see the text of the bill and move it forward to the full Congress."

Some members of Congress have tried various ways over the years to curb wealthy absentee landowners from receiving farm payments. Sen. Chuck Grassley, R-Iowa, and Sen. Sherrod Brown, D-Ohio, introduced the "Farm Program Integrity Act" in 2023 to tighten rules defining "actively engaged in farming," as well as remove exemptions for payment limits for farms organized as general partnerships.

The Grassley-Brown bill points to a Government Accountability Office (GAO) report in 2018 showing absentee partners in farms received $260 million although they did not work or live on the farms. There were another 150 general partnerships with at least 11 or more absentee "managers" who each were receiving separate payment limits for the operation.

"The current law loopholes provide mega farms with excessive government subsidies which can then be used to outbid everyone else, especially cash-strapped beginning farmers, to buy or rent farmland as it comes on the market," according to a summary of Grassley and Brown's bill. "Over time, this reduces economic opportunity in farming, stratifies wealth, makes it even harder for new farmers to get started and harms rural economies and the vitality of rural communities."

Also see, "House, Senate Ag Chairs Announce Plans for Drafting a Farm Bill This Year," https://www.dtnpf.com/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

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