**COMMODITY PROGRAMS**

Sec.1001.Definitions.

**Subtitle A-Direct Payments and Counter-Cyclical Payments**

Sec.1101.Base acres, payment acres, and payment yields.

Sec.1102.Direct payments.

Sec.1103.Counter-cyclical payments.

Sec.1104.Producer agreement required as condition of provision of direct
payments and counter-cyclical payments.

Sec.1105.Planting flexibility.

Sec.1106.Land transferred for non-agricultural uses.

Sec.1107.Period of effectiveness.

**Subtitle B-Marketing Assistance Loans and Loan Deficiency Payments**.

Sec.1201.Marketing assistance loans and loan deficiency payments.

**Subtitle C-Sugar**

**Chapter 1 Price Support**

Sec.1301.Sugar price support program.

CONGRESSDOC

**Chapter 2 Marketing Allotments**

Sec.1302.Transferring flexible marketing allotments authorities.

**Subtitle D-Dairy**

Sec.1401. Dairy price support; National dairy market loss payments;
Dairy export incentive program.

**Subtitle E-Administration**

Sec.1501.Administration, generally.

**Subtitle F-Payment Limitation and Adjusted Gross Income Limitation**

Sec.1601.Payment limitation and adjusted gross income limitation.

**TITLE I-COMMODITY PROGRAMS**

**SEC. 1001. DEFINITIONS**.

Section 1001 of the Farm Security and Rural Investment Act of 2002 (7
U.S.C. 7901) is amended to read as follows-

**"SEC. 1001. DEFINITIONS.**

"In this title (except chapter 2 of subtitle C):

"(1) [base acres]{.smallcaps}.-The term 'base acres', with respect to a
covered commodity on a farm, means the number of acres established under
sections 1101 or 1302, as those sections existed one day before the date
of enactment of *farm bill 2007.*

"(2) [beginning farmer or rancher]{.smallcaps}.-The term 'beginning
farmer or rancher' means a beginning farmer or rancher as defined in
section 343(8) of the Consolidated Farm and Rural Development Act (7
U.S.C.1991(8)).

"(3) [counter-cyclical payment]{.smallcaps}.-The term 'counter-cyclical
payment' means a payment made to producers on a farm under section 1103.

"(4) [covered commodity]{.smallcaps}.-The term 'covered commodity' means
wheat, corn, grain sorghum, barley, oats, peanuts, upland cotton, rice,
soybeans and other oilseeds.

"(5) [direct payment]{.smallcaps}.-The term 'direct payment' means a
payment made to producers on a farm under section 1102.

"(6) [Extra long staple cotton]{.smallcaps}.-The term 'extra long staple
cotton' means cotton that---

"(A) is produced from pure strain varieties of the Barbadense species or
any hybrid thereof, or other similar types of extra long staple cotton,
designated by the Secretary, having characteristics needed for various
end uses for which United States upland cotton is not suitable and grown
in irrigated cotton-growing regions of the United States designated by
the Secretary or other areas designated by the Secretary as suitable for
the production of the varieties or types; and

"(B) is ginned on a roller-type gin or, if authorized by the Secretary,
ginned on another type gin for experimental purposes.

"(7) [loan commodity]{.smallcaps}.-The term 'loan commodity' means
wheat, corn, grain sorghum, barley, oats, upland cotton, extra long
staple cotton, peanuts, rice, soybeans, other oilseeds, wool, mohair,
honey, dry peas, lentils, and small chickpeas.

"(8) [other oilseeds]{.smallcaps}.-The term 'other oilseeds' means a
crop of sunflower seed, rapeseed, canola, safflower, crambe, sesame
seed, flaxseed, mustard seed, or, if designated by the Secretary,
another oilseed.

"(9) [payment acres]{.smallcaps}.-The term 'payment acres' means 85
percent of the base acres of a covered commodity on a farm, as
established under section 1101 or 1302, as those sections existed one
day before the date of enactment of *farm bill 2007*.

"(10) [payment yield]{.smallcaps}.-The term 'payment yield' means the
yields established for a covered commodity on a farm under section 1102
or 1302 for direct payments and counter-cyclical payments, respectively,
as those sections existed one day before the date of enactment of *farm
bill 2007.*

"(11) [producer]{.smallcaps}.-The term 'producer' means an owner,
operator, landlord, tenant, or sharecropper that shares in the risk of
producing a crop and is entitled to share in the crop available for
marketing from the farm, or would have shared had the crop been
produced. A grower of hybrid seed shall be considered a producer whether
or not the producer has title to the seed or otherwise shares in the
risk of producing such seed.

> "(12) [secretary]{.smallcaps}.-The term 'Secretary' means the
> Secretary of Agriculture.

"(13) [state.]{.smallcaps}-The term 'State' means each of the several
States of the United States, the District of Columbia, the Commonwealth
of Puerto Rico, and any other territory or possession of the United
States.

"(14) [united states]{.smallcaps}.-The term 'United States', when used
in a geographical sense, means all of the States.".

**Subtitle A---DIRECT PAYMENTS AND COUNTER- CYCLICAL PAYMENTS**

**[Sec. 1101. Base acres, payment acres, and payment
yields.]{.smallcaps}**

Section 1101 of the Farm Security and Rural Investment Act of 2002 (7
U.S.C. 7911) is amended to read as follows:

**"SEC. 1101. [BASE ACRES, PAYMENT ACRES, AND PAYMENT
YIELDS]{.smallcaps}**.

"(a) IN GENERAL.-The Secretary shall maintain base acres and payment
yields for a covered commodity on a farm.

"(b) [ELECTION.]{.smallcaps}-The owner of a farm may elect to
permanently reduce, at any time, the

base acres for any covered commodity for the farm.

"(c) PERMANENT TERMINATION**.-**The Secretary shall permanently
terminate the base acres for a covered commodity for a farm if that farm
is acquired in a transaction subject to section 1031 of the Internal
Revenue Code of 1986.

"(d) NON-AGRICULTURAL USES.-Base acres eligible for payments on a farm
may not be devoted to non-agricultural uses.".

**SEC. 1102. DIRECT PAYMENTS**.

Section 1102 of the Farm Security and Rural Investment Act of 2002 (7
U.S.C. 7912) is amended to read as follows:

" **SEC. 1102. DIRECT PAYMENTS**.

"(a) PAYMENT REQUIRED.-The Secretary shall, through annual contracts,
make direct payments to producers on farms for which payment yields and
base acres for a covered commodity are established.

"(b) PAYMENT RATE.-

"(1) IN GENERAL.-Except as provided in paragraph (3), the payment rates
used to make direct payments with respect to covered commodities for the
2008, 2009, and, subject to paragraph (2), subsequent crop years, are as
follows:

> "(A) Wheat, \$0.52 per bushel.
>
> "(B) Corn, \$0.28 per bushel.
>
> "(C) Grain sorghum, \$0.35 per bushel
>
> "(D) Barley, \$0.25 per bushel.
>
> "(E) Oats, \$0.024 per bushel.
>
> "(F) Upland cotton, \$0.1108 per pound.
>
> "(G) Rice, \$2.35 per hundredweight.
>
> "(H) Soybeans, \$0.47 per bushel.

"(I) Other Oilseeds, \$0.0080 per pound.

"(J) Peanuts, \$36.00 per ton.

> "(2) 2010-2112 CROP YEARS.-Except as provided in paragraph (3), the
> payment rates used to make direct payments with respect to covered
> commodities for the 2010 through 2012 crop years are as follows:
>
> "(A) Wheat, \$0.56 per bushel.
>
> "(B) Corn, \$0.30 per bushel.
>
> "(C) Grain sorghum, \$0.37 per bushel
>
> "(D) Barley, \$0.26 per bushel.
>
> "(E) Oats, \$0.03 per bushel.
>
> "(F) Upland cotton, \$0.1108 per pound.
>
> "(G) Rice, \$2.52 per hundredweight.

"(H) Soybeans, \$0.50 per bushel.

"(I) Other Oilseeds, \$0.00857 per pound.

"(J) Peanuts, \$38.61 per ton.

> "(3) BEGINNING FARMERS AND RANCHERS.-
>
> "(A) IN GENERAL.-The payment rates used to make direct payments with
> respect to covered commodities to a beginning farmer or rancher during
> the first five years of the beginning farmer's or rancher's operation,
> as determined by the Secretary, for the 2008, 2009, and, subject to
> subparagraph (B), subsequent crop years, are as follows:
>
> "(i) Wheat, \$0.624 per bushel.
>
> "(ii) Corn, \$0.336 per bushel.
>
> "(iii) Grain sorghum, \$0.42 per bushel.
>
> "(iv) Barley, \$0.30 per bushel.
>
> "(v) Oats, \$0.0288 per bushel.
>
> "(vi) Upland cotton, \$0.1330 per pound.
>
> "(vii) Rice, \$2.82 per hundredweight.
>
> "(viii) Soybeans, \$0.564 per bushel.
>
> "(ix) Other oilseeds, \$0.0096 per pound.
>
> "(x) Peanuts, \$43.20 per ton.
>
> "(B) 2010-2012 CROP YEARS.-The payment rates used to make direct
> payments to a beginning farmer or rancher with respect to covered
> commodities for the 2010 through 2012 crop years are as follows:
>
> "(i) Wheat, \$0.672 per bushel.
>
> "(ii) Corn, \$0.36 per bushel.
>
> "(iii) Grain sorghum, \$0.444 per bushel.
>
> "(iv) Barley, \$0.312 per bushel.
>
> "(v) Oats, \$0.036 per bushel.
>
> "(vi) Upland cotton, \$0.1330 per pound.
>
> "(vii) Rice, \$3.024 per hundredweight.
>
> "(viii) Soybeans, \$0.60 per bushel.
>
> "(ix) Other oilseeds, \$0.0103 per pound.
>
> "(x) Peanuts, \$46.332 per ton.

"(c) PAYMENT AMOUNT.- The amount of the direct payment to be paid to the
producers on a farm for a covered commodity for a crop year shall be
equal to the product of the following:

"(1) The payment rate specified in subsection (b);

"(2) The payment acres of the covered commodity on the farm; and

"(3) The payment yield for a direct payment for the covered commodity on
the farm.

"(d) TIME FOR PAYMENT.-

"(1) IN GENERAL.-The Secretary shall make direct payments not before
October 1 of the calendar year in which the crop of the covered
commodity is harvested.

"(2) ADVANCE PAYMENTS.-At the option of the producers on a farm, up to
22 percent of the direct payment shall be paid to the producers in
advance. The producers shall select the month within which the advance
payment for a crop year will be made. The month selected may be any
month during the period beginning on December 1 of the calendar year
before the calendar year in which the crop of the covered commodity is
harvested through the month within which the direct payment would
otherwise be made. The producers may change the selected month for a
subsequent crop year advance payment by providing advance notice to the
Secretary.

> "(3) REPAYMENT OF ADVANCE PAYMENTS.-If a producer on a farm that
> receives an advance direct payment for a crop year ceases to be a
> producer on that farm, or the extent to which the producer shares in
> the risk of producing a crop changes, before the date the remainder of
> the direct payment is made, the producer shall be responsible for
> repaying the Secretary the applicable amount of the advance payment,
> as determined by the Secretary.

"(e) CONSERVATION ENHANCED PAYMENT OPTION.---

"(1) [IN GENERAL]{.smallcaps}.-All producers on a farm that meet the
eligibility requirements of paragraph (2) may, in lieu of direct
payments otherwise provided in this section, make a one time election to
receive enhanced direct payments through crop year 2012 in accordance
with this subsection.

"(2) [ELIGIBILITY.]{.smallcaps}-To be eligible to obtain an enhanced
direct payment for a covered commodity for a crop year under this
subsection, the producers on a farm shall enter into a contract with the
Secretary under which the producers of the farm agree, for each crop
year---

> "(A) to forgo all counter-cyclical payments under this subtitle and
> all marketing assistance loans and all loan deficiency payments under
> subtitle B for the farm subject to a contract under this subsection;
>
> "(B) to carry out conservation practices on the farm that are at least
> equivalent to the requirements for land enrolled under the progressive
> tier of a conservation security contract entered into under section
> 1238A of the Food Security Act of 1985 (16 U.S.C. 3838a); and
>
> "(C) to meet such other requirements as are established by the
> Secretary.

"(3) [AMOUNT]{.smallcaps}.-The amount of an enhanced direct payment to
be paid to the producers on a farm for a covered commodity for a crop
year that enter into a contract with the Secretary under this subsection
shall be equal to the product obtained by multiplying---

> "(A) the amount of the direct payment the producers on a farm would
> otherwise be eligible to receive under subsection (c); and
>
> "(B) 1.10.

"(4) [one time enrollment]{.smallcaps}.-Producers on a farm shall have
one period of time (as determined by the Secretary) in which to enter
into a contract for a conservation enhanced payment.

"(f) DE MINIMIS PAYMENTS.-A payment under this section that is less than
\$10.00 in amount shall not be tendered to a producer on a farm.".

**SEC. 1103. COUNTER-CYCLICAL PAYMENTS**.

Section 1103 of the Farm Security and Rural Investment Act of 2002 (7
U.S.C. 7913) is amended to read as follows:

"**SEC. 1103. COUNTER-CYCLICAL PAYMENTS.**

"(a) PAYMENT REQUIRED.-The Secretary shall make counter-cyclical
payments to producers on farms for which payment yields and base acres
are established with respect to a covered commodity, if the Secretary
determines that the national actual revenue per acre for the covered
commodity (except for other oilseeds) is less than the national target
revenue per acre for the covered commodity, as determined in this
section.

"(b) NATIONAL ACTUAL REVENUE PER ACRE.-For each covered commodity
(except for other oilseeds) for the applicable year, the Secretary shall
establish a national actual revenue per acre by multiplying the national
average yield for the given year by the higher of:

> "(1) the national average market price received by producers during
> the 12-month marketing year established by the Secretary; or
>
> "(2) the loan rate.

"(c) NATIONAL TARGET REVENUE PER ACRE.BThe national target revenue per
acre shall be, on a per acre basis, as follows:

> "(1) Wheat, \$140.42.

"(2) Corn, \$344.12.

> "(3) Grain Sorghum, \$131.28.

"(4) Barley, \$123.13.

"(5) Oats, \$88.36.

> "(6) Upland cotton, \$516.86.
>
> "(7) Rice, \$548.06.
>
> "(8) Soybeans, \$219.58 .
>
> "(9) Peanuts, \$683.83.

"(d) NATIONAL PAYMENT YIELD.-The national payment yield shall be as
follows:

"(1) Wheat, 36.1 bushels per acre.

"(2) Corn, 114.2 bushels per acre.

"(3) Grain Sorghum, 58.1 bushels per acre.

"(4) Barley, 48.7 bushels per acre.

"(5) Oats, 49.8 bushels per acre.

"(6) Upland cotton, 636 pounds per acre.

"(7) Rice, 51.24 hundredweight per acre.

"(8) Soybeans, 34.1 bushels per acre.

"(9) Peanuts, 1.495 tons per acre.

"(e) [NATIONAL PAYMENT RATE]{.smallcaps}.-The national payment rate used
to make counter-cyclical payments for a crop year shall be the result
of-

"(1) the difference between the national target revenue per acre for the
covered commodity and the national actual revenue per acre for the
covered commodity; divided by

> "(2) the national payment yield for the covered commodity.

"(f) PAYMENT AMOUNT- If counter-cyclical payments are required to be
paid for any of the 2008 through 2012 crop years of a covered commodity,
the amount of the counter-cyclical payment to be paid to the producers
on a farm for that crop year for the covered commodity shall be equal to
the product of -

> "(1) the national payment rate for the covered commodity;
>
> "(2) the payment acres of the covered commodity on the farm; and
>
> "(3) the payment yield for counter-cyclical payments for the covered
> commodity.

"(g) TIME FOR PAYMENTS.-

"(1) GENERAL RULE.- If the Secretary determines that counter-cyclical
payments are required to be made under this section for the crop of a
covered commodity, the Secretary shall make the counter-cyclical
payments for the crop as soon as practicable after the end of the
12-month marketing year for the covered commodity.

"(2) AVAILABILITY OF PARTIAL PAYMENTS.-If, before the end of the
12-month marketing year for a covered commodity, the Secretary estimates
that counter-cyclical payments will be required for the crop of the
covered commodity, the Secretary shall give producers on a farm the
option to receive partial payments of the counter-cyclical payment
projected to be made for that crop of the covered commodity.

"(3) TIME FOR PARTIAL PAYMENTS.-When the Secretary makes partial
payments available under paragraph (2) for a covered commodity-

> "(A) the first partial payment for the crop year shall be made not
> earlier than October 1, and, to the maximum extent practicable, not
> later than October 31, of the calendar year in which the crop of the
> covered commodity is harvested;
>
> "(B) the second partial payment shall be made not earlier than
> February 1 of the next calendar year; and
>
> "(C) the final partial payment shall be made as soon as practicable
> after the end of the 12-month marketing year for the covered
> commodity.

"(4) AMOUNT OF PARTIAL PAYMENTS.-

> "(A) FIRST PARTIAL PAYMENT.-The first partial payment under paragraph
> (3) to the producers on a farm may not exceed 35 percent of the
> projected counter-cyclical payment for the covered commodity for the
> crop year, as determined by the Secretary.
>
> "(B) [SECOND PARTIAL PAYMENT]{.smallcaps}- The second partial payment
> under paragraph (3) for a covered commodity for a crop year may not
> exceed the difference between\--
>
> "(i) 70 percent of the projected counter-cyclical payment (including
> any revision thereof) for the crop of the covered commodity; and
>
> "(ii) the amount of the payment made under subparagraph (A).
>
> "(C) FINAL PAYMENT.-The final payment for the crop year shall be equal
> to the difference between\--
>
> "(i) the actual counter-cyclical payment to be made to the producers
> for the covered commodity for that crop year; and
>
> "(ii) the amount of the partial payments made to the producers on a
> farm under subparagraphs (A) and (B) for that crop year.

"(5) REPAYMENT.-Producers on a farm that receive a partial payment under
this subsection for a crop year shall repay to the Secretary the amount,
if any, by which the total of the partial payments exceed the actual
counter-cyclical payment to be made for the covered commodity for that
crop year.

"(h) DE MINIMIS PAYMENTS.-A payment under this section that is less than
\$10.00 in amount shall not be tendered to a producer on a farm.".

**[SEC. 1104]{.smallcaps}**. **[PRODUCER AGREEMENT REQUIRED AS CONDITION
OF PROVISION OF DIRECT PAYMENTS AND COUNTER-CYCLICAL
PAYMENTS]{.smallcaps}**.

Section 1104 of the Farm Security and Rural Investment Act of 2002 (7
U.S.C. 7914) is amended -

> \(1\) by redesignating section 1105 as 1104;

\(2\) by striking subsection (a)(1)(C) and (D) and redesignating
subparagraph (E) as (C);

> \(3\) in subparagraph (C) (as redesignated in paragraph (2) by
> striking everything from "Secretary" through "subparagraph (D)" and
> inserting "Secretary."; and
>
> \(4\) in subsection (c) by striking "shall" and inserting "may".

**SEC. 1105. PLANTING FLEXIBILITY**.

Section 1105 of the Farm Security and Rural Investment Act of 2002 (7
U.S.C. 7915) is amended to read as follows:

**"SEC. 1105. PLANTING FLEXIBILITY**.

"(a) [in general]{.smallcaps}.-Subject to the conservation provisions
under title XII of the Food Security Act of 1985 (16 U.S.C. 3801 et
seq.) any commodity or crop may be planted on any portion of a farm
enrolled in the programs established under this title.

["(]{.smallcaps}b[) crop price monitoring]{.smallcaps}.-The Secretary
shall monitor crop prices and conditions.".

**SEC. 1106. LAND TRANSFERRED FOR NON-AGRICULTURAL USES.**

Section 1106 of the Farm Security and Rural Investment Act of 2002 (7
U.S.C. 7916) is amended to read as follows:

"**SEC. 1106. LAND TRANSFERRED FOR NON-AGRICULTURAL USES.**

In the case of transfers of a farm, or portion of a farm, that occur
subsequent to the date of enactment of *farm bill 2007*, the base acres
for covered commodities for the farm shall be reduced permanently in a
manner as determined by the Secretary in proportion to the amount of
acreage of the farm that was transferred for nonagricultural uses if
such nonagricultural use occurs prior to December 31, 2012.".

**SEC. 1107. PERIOD OF** **EFFECTIVENESS**.

\(h\) Section 1107 of the Farm Security and Rural Investment Act of 2002
(7 U.S.C. 7918) is amended to read as follows:

"**SEC. 1107. PERIOD OF** **EFFECTIVENESS.**

"This subtitle shall be effective for the 2008 through 2012 crop
years.".

**Subtitle B-MARKETING ASSISTANCE LOANS AND LOAN DEFICIENCY PAYMENTS**

**SEC. 1201. MARKETING ASSISTANCE LOANS AND LOAN DEFICIENCY PAYMENTS**

\(a\) Section 1201 of the Farm Security and Rural Development Act of
2002 (7 U.S.C. 7931) is amended-

\(1\) in subsection (a)(1) by striking everything from "For each of"
through "loan commodity, the" and inserting "The";

> \(2\) by amending subsection (b) to read as follows:

"(b) [eligible production]{.smallcaps}.--

"(1) [in general]{.smallcaps}.-The producers on a farm shall be eligible
for a marketing assistance loan under subsection (a) for any quantity of
a loan commodity produced on the farm. In addition, such producers must
have beneficial interest, as determined under paragraph (2), in the
commodity at the time the commodity is tendered as collateral for such
loan.

"(2) [beneficial interest]{.smallcaps}.-In order to have beneficial
interest in a commodity, a producer shall:

> "(A) be the producer of the commodity;
>
> "(B) possess and maintain ownership and control of the commodity;
>
> "(C) not have received any payment from any party with respect to the
> commodity; and
>
> "(D) satisfy other criteria, as determined by the Secretary.

"(3) [ineligible production]{.smallcaps}.-A crop of a loan commodity
shall be ineligible for a marketing assistance loan if the crop was
produced on land of a farm that has been subject to

> a land transaction covered under section 1101(c)."; and

\(3\) by striking subsection (e) and inserting:

"(e) [adjustments of loans]{.smallcaps}**.-**

> "(1) [adjustment authority]{.smallcaps}.-The Secretary may make
> appropriate adjustments in the loan rates for any commodity for
> differences in grade, type, quality, location, and other factors.

"(2) [manner of adjustment]{.smallcaps}.-The adjustments under the
authority of this section shall, to the maximum extent practicable, be
made in such manner that the national average loan rate for the
commodity will, on the basis of the anticipated incidence of the
factors, be equal to the level of support determined as provided in this
title.

"(f) [handling and storage charges]{.smallcaps}.-All payments for
storage, handling or other charges associated with a loan commodity
subject to a marketing assistance loan or loan deficiency payment under
this subtitle are the responsibility of the producer and shall not be
paid by the Secretary.

\(b\) Section 1202 of the Farm Security and Rural Investment Act of 2002
(7 U.S.C. 7932) is amended to read as follows:

**"SEC. 1202. LOAN RATES FOR NONRECOURSE MARKETING ASSISTANCE LOANS.**

"(a) [in general]{.smallcaps}.-Except as provided in subsection (b), the
loan rate for each crop of a loan commodity shall be equal to the amount
determined by multiplying:

"(1) .85; and

"(2) the average of the national average market price received by
producers during the five preceding marketing years, excluding the
highest and lowest prices determined for such years, as determined by
the Secretary.

"(b) [loan rates]{.smallcaps}.-The loan rate determined under (a) shall
not exceed, in the case of-

> "(1) wheat, \$2.58 per bushel;
>
> "(2) corn, \$1.89 per bushel;
>
> "(3) grain sorghum, \$1.89 per bushel;
>
> "(4) barley, \$1.70 per bushel;
>
> "(5) oats, \$1.21 per bushel;

"(6) upland cotton, \$0.5192 per pound;

> "(7) extra long staple cotton, \$0.7965 per pound;
>
> "(8) rice, \$6.50 per hundredweight;
>
> "(9) soybeans, \$4.92 per bushel;
>
> "(10) other oilseeds, \$0.087 per pound;
>
> "(11) graded wool, \$1.00 per pound;
>
> "(12) nongraded wool, \$0.40 per pound;
>
> "(13) mohair, \$4.20 per pound;
>
> "(14) honey, \$0.60 per pound;
>
> "(15) dry peas, \$6.22 per hundredweight;
>
> "(16) lentils, \$11.72 per hundredweight;
>
> "(17) small chickpeas, \$7.43 per hundredweight; and
>
> "(18) peanuts, \$350.00 per ton.".

\(c\) Section 1204 of the Farm Security and Rural Investment Act of 2002
(7 U.S.C. 7934) is amended-

> \(1\) by amending subsection (a) as to read follows:

"(a) GENERAL RULE.-

> "(1) [repayment of commodity loans]{.smallcaps}.-The Secretary shall
> permit the producers on a farm to repay a marketing assistance loan
> under section 1201 for a loan commodity (other than upland cotton,
> rice, extra long staple cotton, confectionary and each other kind of
> sunflower seed (other than oil sunflower seed)) at a rate that is the
> lesser of-
>
> "(A) the loan rate established for the commodity under section 1202,
> plus interest (determined in accordance with section 163 of the
> Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C.
> 7283)); or
>
> "(B) a rate that the Secretary determines will\--
>
> "(i) minimize potential loan forfeitures;
>
> "(ii) minimize the accumulation of stocks of the commodity by the
> Federal Government;
>
> "(iii) minimize the cost incurred by the Federal Government in storing
> the commodity;
>
> "(iv) allow the commodity produced in the United States to be marketed
> freely and competitively, both domestically and internationally; and
>
> "(v) minimize discrepancies in marketing loan benefits across State
> boundaries and across county boundaries.
>
> "(2) [rate]{.smallcaps} [adjustments]{.smallcaps}.-
>
> "(A) [in general]{.smallcaps}.-Subject to subparagraph (B) and except
> as provided in subsection (b), repayment rates established under this
> section shall be adjusted by the Secretary no more than once every
> month for all loan commodities.
>
> "(B) [monthly repayment rate]{.smallcaps}.-In establishing the monthly
> repayment rates with respect to wheat, corn, grain sorghum, barley,
> oats and soybeans, the rates shall be established by using the rates
> determined for five days in the previous month as determined in
> regulations issued by the Secretary, which shall-
>
> "(i) exclude the rates for days that represent the highest and lowest
> rates for the 5 day period; and
>
> "(ii) use the average of the three remaining rates to establish the
> monthly repayment rate.

"(3) [date for determining repayment rate.-]{.smallcaps}With respect to
the monthly repayment rates established under paragraph (2) and
subsection (b) and (c), the rate shall be-

> "(A) in the case of a producer who, as determined by the Secretary,
> loses beneficial interest immediately upon repayment of the loan, the
> monthly repayment rate determined under paragraph (2) and subsection
> (b) and (c) that is in effect on the date beneficial interest is lost;
> and
>
> "(B) in the case of other producers who did not lose beneficial
> interest upon repayment of the loan, the repayment rate in effect on
> the earlier of:
>
> "(i) the month in which the loan matures; or

"(ii) the last month of the marketing year established by the Secretary
for the commodity.

"(4) [repayment of confectionary and other kinds of sunflower seeds
loans.]{.smallcaps}- The Secretary shall permit the producers on a farm
to repay a marketing assistance loan under section 1201 for
confectionary and each other kind of sunflower seed (other than oil
sunflower seed) at a rate that is the lesser of-

"(A) the loan rate established for the commodity under section 1202,
plus interest (determined in accordance with section 163 of the Federal
Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 7283)); or

> "(B) the repayment rate established for oil sunflower seed.

"(5) [quality grades for dry peas, lentils, and small
chickpeas]{.smallcaps}.-The loan repayment rates for dry peas, lentils,
and small chickpeas shall be based on the quality grades for the
applicable commodity."; and

> \(2\) in subsection (e)-
>
> \(A\) by striking "(1) In General.-";
>
> \(B\) in the stem by striking "2008\" and inserting "2013\"'
>
> \(C\) by striking "(A) the adjusted" and inserting "(1) the adjusted";
>
> \(D\) by striking "(B) the Friday" and inserting "(2) the Friday"; and
>
> \(E\) by striking paragraphs (2) and (3); and
>
> \(3\) by striking subsections (f)-(h).

\(d\) Section 1205 of the Farm Security and Rural Investment Act of 2002
(7 U.S.C. 7935) is amended-

> \(1\) in subsection (a)-
>
> \(A\) by redesignating paragraph (2) as paragraph (3), and inserting a
> new paragraph (2) that reads as follows:
>
> "(2) [beneficial interest]{.smallcaps}.-At the time producers request
> payments under this section, the producers must have beneficial
> interest, as defined in section 1201(b)(2), in the commodity for which
> such payment is requested."; and
>
> \(B\) in paragraph (3) (as redesignated in subparagraph (A)) by
> striking "However, effective for the 2002 through 2007 crop years,
> the" and inserting "The";

\(2\) by amending subsection (c) to read as follows:

"(c) [payment rate]{.smallcaps}.-

"(1) [loan commodities]{.smallcaps}.--

> "(A) [in general]{.smallcaps}.-With respect to all loan commodities
> except extra long staple cotton, the payment rate shall be determined
> as of the day the producer loses beneficial interest in the commodity.
>
> "(B) [formula]{.smallcaps}.-The payment rate under subparagraph (A)
> shall be the amount that equals the difference between -

"(i) the loan rate established under section 1202 for the loan
commodity; and

> "(ii) the monthly repayment rate determined for the commodity under
> section 1204.
>
> "(2) [unshorn pelts]{.smallcaps}.-- In the case of unshorn pelts, the
> payment rate shall be the amount that equals the difference between--

"(A) the loan rate established under section 1202 for ungraded wool: and

"(B) the rate at which ungraded wool may be redeemed under section 1204.

"(3) [hay, silage, feed and similar uses]{.smallcaps}.-

> "(A) [in general]{.smallcaps}.-In the case of a commodity that would
> otherwise be eligible to be pledged as collateral for a marketing
> assistance loan at the time of harvest of the commodity, but cannot be
> pledged due to the normal commercial state of the commodity,
>
> the payment rate shall be the average of the monthly repayment rates
> established for the first three months of the marketing year of the
> commodity, as determined by the Secretary.
>
> "(B) [inclusions]{.smallcaps}.-Commodities covered by subparagraph (A)
> shall be determined by the Secretary, and shall include hay, silage,
> cracked corn, and corn stored in a commingled manner by feedlots.";
> and
>
> \(3\) by striking subsection (f).

\(e\) Section 1206 of the Farm Security and Rural Investment Act of 2002
(7 U.S.C. 7936) is amended-

\(1\) in subsection (a) by striking everything from "Effective for the
2002 through 2007 "crop years, in" in each place it appears, and
inserting "In"; and

> \(2\) in subsection (d) by striking "A 2002 through 2007 crop of" and
> inserting "A crop of".

\(f\) Section 1207 of the Farm Security and Rural Investment Act of 2002
(7 U.S.C. 7937) is amended-

\(1\) by striking subsection (b) and redesignating subsection (c) as
(a); and

\(2\) in subsection (a) (as redesignated)-

\(A\) by striking paragraph (2); and

\(B\) by redesignating paragraph (1)(E) as paragraph (2).

\(g\) Section 1208 of the Farm Security and Rural Investment Act of 2002
(7 U.S.C. 7938) is amended-

> \(1\) by striking the section;
>
> \(2\) by redesignating section 1209 as section 1208;
>
> \(3\) in section 1208 (as redesignated in paragraph (2))-
>
> \(A\) in subsection (a)(1) by striking "For each of the 2002 through
> 2007 crops of" and inserting "For each crop of"; and
>
> \(B\) in subsection (b) by striking "For each of the 2002 through 2007
> crops of" and inserting "For each crop of"; and
>
> \(C\) by striking subsection (d).

\(h\) Section 1209 is amended to read as follows:

"**SEC. 1209. PERIOD OF** **EFFECTIVENESS**.

"This subtitle shall be effective for the 2008 through 2012 crop
years.".

**Subtitle C-Sugar**

**Chapter I Price Support**

**[SEC. 1301. SUGAR PRICE SUPPORT PROGRAM.]{.smallcaps}**

\(a\) Subtitle C title I, of the Farm Security and Rural Investment Act
of 2002 (7 U.S.C. 7951 et seq.) is amended-

> \(1\) by repealing sections 1301-1307, 1308(a)-(b) and (d)-(h), and
> 1309-1310;
>
> \(2\) by redesignating section 1308(c) (7 U.S.C. 7958(c)) as section
> 1509 of that Act, and moving the section so as to appear after section
> 1508 of that Act; and
>
> \(3\) by amending the subtitle heading to read as follows:
>
> **"SUBTITLE C---SUGAR**
>
> **Chapter 1 Price Support\"**.

\(b\) Section 156 of the Federal Agriculture Improvement and Reform Act
of 1996 (7 U.S.C. 7272) is-

\(1\) redesignated as section 1301 of the Farm Security and Rural
Investment Act of 2002 (7 U.S.C. 7951); and

> \(2\) moved so as to appear after section 1209 of that Act.

\(c\) Section 1301 (as redesignated and moved in subsection (b)) is
amended in subsection (j) by striking "1996 through 2007\" and inserting
"2008 through 2012\".

\(d\) Chapter 1, subtitle C of the Farm Security and Rural Investment
Act of 2002 (7 U.S.C. 7951 et seq.) is amended by adding at the end:

"**SEC. 1302. PERIOD OF** **EFFECTIVENESS**.

"This chapter shall be effective for the 2008 through 2012 fiscal
years.".

**Chapter 2 Marketing Allotments**

**SEC. 1302. TRANSFERRING FLEXIBLE MARKETING ALLOTMENTS AUTHORITIES**.

\(a\) Subtitle C of the Farm Security And Rural Investment Act of 2002
(7 U.S.C. 7951 et seq.) is amended by adding after section 1302-

**"Chapter 2 Marketing Allotments**\";

\(b\) Part VII, subtitle B of title III of the Agricultural Adjustment
Act of 1938 (7 U.S.C. 1359aa-1359kk) is-

\(1\) redesignated as sections 1303-1313 of chapter 2, Subtitle C, title
I of the Farm Security and Rural Investment Act of 2002 (*as amended by
Farm Bill 2007*); and

> \(2\) moved so as to appear after chapter 1, subtitle C, title I of
> that Act.

\(c\) Sections 1303-1313 of subtitle C, title I of the Farm Security and
Rural Investment Act of 2002 (7 U.S.C. 7951 et seq.) (as redesignated in
subsection (a)) are amended-

\(1\) except in sections 1306(b)(1)(F), 1307(a), and 1311(b)(1)
(formerly sections 359d

> (b)(1)(F), 359e(a), and 359i(b)(1), respectively), by striking "part"
> every place it occurs and inserting "chapter";
>
> \(2\) in section 1303(3) (formerly section 359a(3)) by striking "301\"
> and inserting "1001\";
>
> \(3\) in section 1304 (formerly section 359bb)-
>
> \(A\) in subsection (a)(1) by striking "2002 through 2007\" and
> inserting "2008 through 2012\"; and

\(B\) in subsection (b)-

\(i\) in paragraph (1)-

\(I\) by striking "359c" and inserting "1305\"; and

\(II\) by striking "section 156 of the Federal Agriculture; and

> \(ii\) in paragraph (3) by striking "section 156 of the Federal
> Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 7272)" and
> inserting "section 1301\";
>
> \(4\) in section 1305 (formerly section 359c)-

\(A\) in subsection (a) by striking "359b(b)" and inserting "1304(b)";

\(B\) in subsection (b)(1) by striking "359b(a)" and inserting
"1304(a)";

> \(C\) in subsection (b)(1)(A) by striking "1,532,000 short tons, raw
> value" and inserting "estimated imports of sugar";

\(D\) in subsection (g)(1) by striking "359b(a)(3)" and inserting
"1304(a)(3)";

> \(E\) in subsection (g)(2)-

\(i\) by striking "359d" and inserting "1306"; and

\(ii\) by striking "359f(c)" and inserting "1308(c)";

> \(F\) by striking subsection (h);
>
> \(5\) in section 1306 (formerly section 359d)-

\(A\) in subsection (a) by striking "359c" and inserting "1305";

\(B\) in subsection (b)(1)(A) by striking "359c(g)" and inserting
"1305(g)";

> \(C\) in subsection (b)(1)(D), in the stem, by striking "359f(c)" and
> inserting "1308(c)";
>
> \(D\) in subsection (b)(1)(E)(iv)(I), by striking "359c(e)(3)" and
> inserting "1305(e)(3)";
>
> \(E\) in subsection (b)(1)(E)(iv)(II), by striking "359c(e)(3)" and
> inserting "1305(e)(3)";
>
> \(F\) in subsection (b)(1)(F), by striking "359f(c)(8)" and inserting
> "1308(c)(8)"; and
>
> \(G\) in subsection (b)(2)(A), by striking "359c(g), 359e(b), and
> 359f(b)" and inserting "1305(g), 1307(b), and 1308(b)"; and

\(6\) in section 1307(a) (formerly section 359e(a))by striking "part"
and inserting "chapter";

\(7\) in section 1308 (formerly section 359f)-

\(A\) in subsection (a) by striking "359d" and inserting "1306";

\(B\) in subsection (c)(1)(A) by striking "359c(f)" and inserting
"1305(f)";

\(C\) in subsection (c)(2) by striking "359c(g)" and inserting
"1305(g)"; and

\(D\) in subsection (c)(5)(A) by striking "359h(a)" and inserting
"1310(a)"; and

> \(8\) in section 1309 (formerly section 359g)-

\(A\) in subsection (a) by striking "359f(c)" and inserting "1308(c)";

\(B\) in subsection (b) by striking "359f(c)" and inserting "1308(c)"

> \(C\) in subsection (c) by striking "359d" and "359f(c) and inserting
> "1306" and "1308(c)", respectively; and
>
> \(D\) in subsection (d)(2)(B) by striking "359f(c)(3)" and inserting
> "1308(c)(3)"; and

\(9\) in section 1310 (formerly section 359h), in subsection (d)(1) by
striking "specifically";

> \(10\) in section 1311 (formerly section 359i)-
>
> \(A\) in subsection (a) by striking "359d" and "359f" and inserting
> "1306" and "1308\", respectively; and
>
> \(B\) in subsection (c)(3)(A)(i) by striking "the Farm Security and
> Rural Investment Act of 2002\" and inserting "this Act\"; and
>
> \(11\) in section 1312 (formerly section 359j)-

\(A\) by striking "[(a) use of certain agencies]{.smallcaps}.-"; and

\(B\) by striking subsection (b); and

> \(12\) in section 1313 (formerly section 359k), by striking "2002
> through 2007\" and inserting "2008 through 2012\".

**Subtitle D-Dairy**

**SEC. 1401. [DAIRY PRICE SUPPORT; NATIONAL DAIRY MARKET LOSS
PAYMENTS]{.smallcaps}; DAIRY EXPORT INCENTIVE PROGRAM**.

\(a\) Sections 1401-1403 of the Farm Security and Rural Investment Act
of 2002-

> \(1\) are repealed; and
>
> \(2\) the subtitle heading is amended to read as follows:
>
> **"SUBTITLE D-DAIRY";**

\(b\) Sections 1501 and 1502 of Farm Security and Rural Investment Act
of 2002 (7 U.S.C. 7981, 7982) are-

\(1\) redesignated as sections 1401 and 1402, respectively, of the Farm
Security and Rural Investment Act of 2002 (7 U.S.C. 7970, 7971); and

\(2\) moved so as to appear after section 1313 (as redesignated in
section 1302(b)) of that Act.

\(c\) Section 1401(a) of the Farm Security and Rural Investment Act of
2002 (as redesignated by subsection (b)) is amended by striking "June 1,
2002\" and "2007\" and inserting "January 1, 2008\" and "2012\",
respectively.

\(d\) NATIONAL DAIRY MARKET LOSS PAYMENTS.-Section 1402 of the Farm
Security and Rural Investment Act of 2002 (7 U.S.C. 7982) (as
redesignated in subsection (b)) is amended-

> \(1\) in subsection (a)-
>
> \(A\) in paragraph (2) by striking "by a producer" and inserting "on a
> farm for an applicable month during the 2004, 2005, and 2006 fiscal
> years";
>
> \(B\) in paragraph (5)-
>
> \(i\) by striking "means an individual or entity" and inserting "means
> one or more individuals or entities";
>
> \(ii\) in subparagraph (A) by striking "milk" and inserting "an
> agricultural commodity"; and
>
> \(iii\) in subparagraph (B)-
>
> \(I\) by striking "dairy"; and
>
> \(II\) by striking "share of the individual or entity" and inserting
> "shares of the one or more individuals or entities";
>
> \(2\) in subsection (b)-
>
> \(A\) by striking "dairy"; and

\(B\) by inserting "on a monthly basis" after "production";

\(3\) in subsection (c) by amending paragraph (3) to read as follows:

"(3) in Fiscal Year-

> "(A) 2008, 34 percent;
>
> "(B) 2009, 31 percent;
>
> "(C) 2010, 28 percent;
>
> "(D) 2011, 25 percent;
>
> "(E) 2012, 22 percent; and
>
> "(F) 2013 and subsequent years, 20 percent.";
>
> \(4\) in subsection (d)-
>
> \(A\) by amending paragraph (1) to read as follows:
>
> "(1) [IN GENERAL.]{.smallcaps}- Subject to paragraph (2), the payment
> quantity for a producer on a farm shall be 85 percent of the 3-year
> average of the eligible production of milk marketed from the farm
> during the 2004, 2005, and 2006 fiscal years."; and

\(B\) by striking the second sentence of paragraph (2);

> \(5\) in subsection (f) by striking "2007\" and inserting "2012\"; and
>
> \(6\) in subsection (g) by striking "2007\" and inserting "2012\".

\(e\) Sections 1503-1508 of the Farm Security and Rural Investment Act
of 2002 are repealed.

\(f\) The dairy export incentive program, section 153(a) of the Food
Security Act of 1985 (15 U.S.C. 713a--14(a)) is amended by striking
"2007" and inserting "2012".

\(g\) Subtitle D of the Farm Security and Rural Investment Act of 2002
(7 U.S.C. 7901 et seq.) is amended by adding at the end:

"**SEC. 1403. PERIOD OF** **EFFECTIVENESS**.

"This subtitle shall be effective for the 2008 through 2012 fiscal
years.".

**Subtitle E-Administration**

**[Sec.1501.Administration, Generally]{.smallcaps}.**

\(a\) The heading for subtitle E, title I of the Farm Security and Rural
Investment Act of 2002 (7 U.S.C. 1501 et seq.) is amended to read as
follows:

> **"SUBTITLE E-ADMINISTRATION".**

\(b\) Subtitle F of title I of this Act is further amended by
redesignating sections 1601-1618

as sections 1501-1518, respectively.

\(c\) Section 1501(e) of the Farm Security and Rural Investment Act of
2002 (7 U.S.C. 7991(e)) (as redesignated in subsection (b)) is amended
to read as follows:

"(e) [ADJUSTMENT AUTHORITY RELATED TO WORLD TRADE ORGANIZATION
AGREEMENTS COMPLIANCE.]{.smallcaps}-

"(1) [required determination; adjustment.]{.smallcaps}- If the Secretary
determines that expenditures subject to the total allowable domestic
support levels under the Uruguay Round Agreements, or any successor
agreements, will exceed such allowable levels for any applicable
reporting period, the Secretary shall, to the maximum extent
practicable, make adjustments in the amount of such expenditures to
ensure that such expenditures do not exceed allowable levels.

"(2) [successor agreements]{.smallcaps}.-For purposes of this
subsection, the term "Uruguay Round Agreements" shall have the meaning
prescribed by Section 2 of the Uruguay Rounds Agreements Act, (19 U.S.C.
3501), and the term "successor agreements" shall refer to any future
agreements concluded under the auspices of the World Trade Organization,
duly approved by the Congress and determined by the President to be a
successor agreement entered into force.

\(d\) Section 1513(e)(3) of the Farm Security and Rural Investment Act
of 2002 (7 U.S.C. 7996(e)(3)) (as redesignated in subsection (b)) is
amended-

> \(1\) by amending subparagraph (A) to read as follows:
>
> "(A) payment limitations under a commodity program or a conservation
> program administered by the Secretary."; and

\(2\) in subparagraph (B) by striking everything from "highly" through
"or C" and inserting " highly erodible land and grassland, and wetland
conservation requirements under subtitles B and C, respectively,".

\(e\) [CONFORMING AMENDMENTS]{.smallcaps}.-

\(1\) Section 1502 of the Farm Security and Rural Investment Act of 2002
(7 U.S.C. 7992) (as redesignated in subsection (b)) is amended-

> \(A\) by striking "2002\" and "2007\" every time they appear and
> inserting "2008\" and "2012\", respectively; and
>
> \(B\) by striking ",peanuts," each place it appears.

\(2\) Title I of the Farm Security and Rural Investment Act of 2002 (7
U.S.C. 7901 et seq.) is amended-

\(A\) by deleting section 1507 and 1508 (as redesignated by subsection
(b));

\(B\) by moving sections 164 and 166 of the Federal Agriculture
Improvement and Reform Act of 1996 (7 U.S.C. 7284, 7286) to be sections
1507 and 1508 of the Farm Security and Rural Investment Act of 2002,
respectively;

\(C\) in section 1507 (as amended by subparagraph (B)) by striking "this
title and title I of the Farm Security and Rural Investment Act of
2002\" and inserting "this title" each place it occurs; and

\(D\) in section 1508 (as amended by subparagraph (B)) by striking
"subtitle C of this title and subtitle B and C of title I of the Farm
Security and Rural Investment Act of 2002\" and inserting "this title"
each place it occurs.

**Subtitle F-Payment Limitation and Adjusted Gross Income Limitation**

**[SEC.1601.]{.smallcaps} PAYMENT LIMITATION AND ADJUSTED GROSS INCOME
LIMITATION.**

\(a\) (1)Title I of the Farm Security and Rural Investment Act of 2002
(7 U.S.C. 7901 et seq.)

is amended by adding at the end:

**"Subtitle F-Payment Limitation and Adjusted Gross Income**

["**SEC.1601.**]{.smallcaps}**GENERAL PAYMENT ELIGIBILITY AND LIMITATION
PROVISIONS**.

"(a) [definitions]{.smallcaps}.-In this subtitle-

"(1) Average Adjusted Gross Income.-The term 'average adjusted gross
income', with respect to a person or legal entity means the 3-year
average of the adjusted gross income or comparable measure of the income
of the person or legal entity over the 3 preceding tax years, as
determined by the Secretary.

"(2) Family Member.-The term 'family member' means a person to whom
another family member in a farming operation is related as a lineal
ancestor, a lineal descendant, or a sibling (including the spouses of
family members who do not provide a significant contribution of active
personal management or active personal labor as determined by the
Secretary).

"(3) Legal Entity.-The term 'legal entity' means an entity that is
created under Federal or State law and that-

> "(A) owns land or an agricultural commodity; or
>
> "(B) produces an agricultural commodity.

"(4) Marketing Loan Gain.-The term 'marketing loan gain' means any gain
realized by a producer from repaying a marketing assistance loan made
available under subtitle B at a lower level than the original loan rate
established for the commodity.

"(5) Payment.-The term 'payment' means a payment, including a marketing
loan gain, provided under a program-

> "(A) under this title; and
>
> "(B) under subtitle D of title XII of the Food Security Act of 1985
> (16 U.S.C. 3830-3839bb-3).

"(6) Person.-The term 'person' means a natural person, and does not
include a legal entity.

"(7) Crop Year.-The term 'crop year' includes the corresponding period,
as determined by the Secretary, with respect to payments made available
to dairy producers under sections 1402.

> "(b) [limitation on payments-commodities]{.smallcaps}.-

"(1) [commodities]{.smallcaps}.-The total amount of payments received
directly or indirectly by a person or any legal entity (except a joint
venture or a general partnership) in any crop year shall not exceed:

> "(A) \$110,000 for direct payments made under section 1102, unless the
> person or legal entity receives a conservation enhanced payment made
> under section 1102(e);
>
> "(B) \$121,000 for direct payments made under section 1102 if the
> person or legal entity receives a conservation enhanced payment made
> under section 1102(e);
>
> "(C) \$110,000 for counter-cyclical payments made under section 1103
> and payments made to the person or legal entity under section 1402;
> and
>
> "(D) \$140,000 for marketing loan gains and loan deficiency payments
> made under subtitle B.
>
> "(2) [overall limitations for commodity payments]{.smallcaps}.-The
> total amount of payments specified in paragraph (1) made to a person
> or legal entity (except a joint venture or a general partnership)
> during any year shall not exceed \$360,000.

"(c) [payments for conservation practices]{.smallcaps}.-The total amount
of payments that a person or a legal entity (except a joint venture or a
general partnership) may receive directly or indirectly in any fiscal
year shall not exceed-

"(1) in the case of the conservation reserve program under subchapter B,
chapter 1, subtitle D of title XII of the Food Security Act of 1985 (16
U.S.C. 3831-3835a), \$100,000 for annual rental payments ; and

"(2) in the case of other programs under subtitle D, title XII of the
Food Security Act of 1985 (16 U.S.C. 3837-3839bb-3)-

> "(A) in the case of the wetlands reserve program under subchapter C,
> chapter 1, (16 U.S.C. 3837-3837e), \$50,000 for easement payments,
> except with respect to payments for 30 year or perpetual easements;
>
> "(B) in the case of the conservation security program under subchapter
> A, chapter 2, subtitle D, title XII of the Food Security Act of 1985
> (16 U.S.C. 3838-3838c)-
>
> "(i) \$35,000 for progressive tier practices; and
>
> "(ii) \$45,000 for master tier practices; and

"(C) in the case of the environmental quality incentives program under
chapter 4;

> \$450,000 for all contracts entered into during any 6 year period
> (excluding funding arrangements with federally recognized Native
> American Indian Tribes or Alaska Native Corporations under section
> 1240B(h)), regardless of the number of contracts entered into under
> the chapter.

"(d) [direct attribution]{.smallcaps}.-

"(1) IN GENERAL.-In implementing the provisions of subsections (b) and
(c), the Secretary shall issue regulations as are necessary to ensure
that the total amount of payments are attributed to a person by taking
into account the direct and indirect ownership interests of the person
in a legal entity that is eligible to receive such payments.

"(2) [payments to a person]{.smallcaps}.-Every payment made directly to
a person shall be combined with the person's pro rata interest in
payments received by a legal entity in which the person has a direct or
indirect ownership interest.

> "(3) [payments to a legal entity]{.smallcaps}.-
>
> "(A) [in general]{.smallcaps}.-Every payment made to a legal entity
> shall be attributed to those persons who have a direct or indirect
> ownership interest in the legal entity.
>
> "(B) [attribution of payments]{.smallcaps}.-
>
> "(i) [payment limits]{.smallcaps}.-Except as provided in clause (ii),
> payments made to a legal entity shall not exceed the amounts specified
> in subsections (b) and (c).
>
> "(ii) [exception.]{.smallcaps}-Payments made to a joint venture or a
> general partnership shall not exceed, for each payment specified in
> subsections (b) and (c), the amount determined by multiplying the
> maximum payment amount specified in subsections (b) and (c) 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.

"(4) [four levels of attribution for embedded entities]{.smallcaps}.

> "(A) [in general]{.smallcaps}.-Attribution of payments made to legal
> entities shall be traced through four levels of ownership in entities.
>
> "(B) [first level]{.smallcaps}.-Any payments made to a legal entity (a
> first-tier entity) that is owned in whole or in part by a person shall
> be attributed to the person in an amount the Secretary determines to
> represent the direct ownership in the first-tier entity by the person.
>
> "(C) [second level]{.smallcaps}.-Any payments made to a first-tier
> entity that is owned in whole or in part by another legal entity (a
> second-tier entity) shall be attributed to the second-tier entity in
> proportion to the second-tier entity's ownership in the first-tier
> entity. If the second-tier entity is owned in whole or in part by a
> person, the amount of the payment made to the first-tier entity shall
> be attributed to the person in the amount the Secretary determines to
> represent the indirect ownership in the first-tier entity by the
> person.
>
> "(D) [third and fourth levels]{.smallcaps}.-The Secretary shall
> attribute payments at the third and fourth tiers of ownership in the
> same manner as specified in subparagraph (C) unless the fourth-tier of
> ownership is that of a fourth-tier entity and not that of a person, in
> which case the Secretary shall reduce the amount of the payment to be
> made to the first-tier entity in the amount that the Secretary
> determines to represent the indirect ownership in the first-tier
> entity by the fourth-tier entity.

"(e) [special rules]{.smallcaps}.-

> "(1) [Married couple]{.smallcaps}.-For purposes of this subtitle, with
> respect to any

married couple-

> "(A) The husband and wife shall be considered to be one person except
> as provided in subparagraph (B); and
>
> "(B) A husband and wife shall be considered to be separate persons if,
> prior to their marriage, each spouse was separately engaged in
> unrelated farming operations and, after their marriage, such farming
> operations remain as separate farming operations.
>
> "(2) [minor children]{.smallcaps}.-A child under the age of 18 shall
> be considered to be one person with the child's parents, except that
> the Secretary shall issue regulations which provide the conditions
> under which a married child under the age of 18 may be considered to
> be a separate person from the child's parents.
>
> "(3) [marketing cooperatives]{.smallcaps}.-The provisions of
> subsection (b)(1) and (2) shall not apply to a cooperative association
> of producers with respect to commodities produced by its members which
> are marketed by such association on behalf of its members but shall
> apply to such producers as persons.
>
> "(4) [trusts and estates]{.smallcaps}.-

"(A) [in general]{.smallcaps}.-With respect to irrevocable trusts and
estates, the Secretary shall

> administer the provisions of this subtitle in such manner as the
> Secretary determines will ensure that fair and equitable treatment of
> the beneficiaries of such trusts and estates.
>
> "(B) [irrevocable trust]{.smallcaps}.-In order for a trust to be
> considered an irrevocable trust, the terms of the trust agreement must
> not allow for modification or termination of the trust by the grantor,
> allow for the grantor to have any future, contingent, or remainder
> interest in the corpus of the trust, or 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 on the remainder beneficiary achieving at least
> the age of majority or is contingent on the death of the grantor or
> income beneficiary.
>
> "(C) [revocable trust]{.smallcaps}.-A revocable trust shall be
> considered to be the same person as the grantor of the trust.

"(5) [cash rent tenants]{.smallcaps}.-

"(A) [definition]{.smallcaps}.- A cash rent tenant is a person or legal
entity that rents land:

"(i) for cash; or

> "(ii) for a crop share guaranteed as to the amount of the commodity to
> be paid in rent.
>
> "(B) RESTRICTION.-A cash rent tenant who makes a significant
> contribution of active personal management, but not of personal labor,
> with respect to a farming operation is eligible to receive a payment
> described in subsection (b) only if the tenant makes a significant
> contribution of equipment used in the farming operation.

"(6) [federal agencies]{.smallcaps}.-

> "(A) [in general]{.smallcaps}.-Federal agencies shall not be eligible
> to receive any payment described in subsections (b) and (c).
>
> "(B) [rents land]{.smallcaps}.-A person or legal entity that rents
> land owned by a Federal agency may receive such payments.
>
> "(7) [State and local governments]{.smallcaps}.-
>
> "(A) [governments ineligible]{.smallcaps}.-
>
> "(i) [in general]{.smallcaps}.-Except as provided in subparagraphs (B)
> and (C), State and local governments and political subdivisions and
> agencies of such governments, shall not be eligible to receive
> payments covered under subsections (b) and (c).
>
> "(ii) [tenants]{.smallcaps}.-A person or legal entity that rents land
> owned by a State or local government or a political subdivision or
> agency of such government, may receive payments covered under
> subsections (b) and (c) if they otherwise meet all applicable
> criteria.

"(B) [exception.]{.smallcaps}-

> "(i) Within the limitation described in clause (ii), a State and the
> political subdivisions and agencies of such governments, may receive
> payments covered under subsections (b) and (c), if the State or a
> political subdivision or agency of such government-
>
> "(I) is the producer of all crops produced on a farm; and
>
> "(II) the proceeds from the crop production are used to maintain a
> public school.
>
> "(ii) For each State, the total amount of payments covered under
> subsections (b) and (c) that are received collectively by the State
> and all political subdivisions or agencies of such governments shall
> not exceed the amounts that one legal entity may receive in one year
> as specified in subsections (b) and (c).
>
> "(C) [share leases]{.smallcaps}.-A State and the political
> subdivisions and agencies of such governments may, without regard to
> the provisions of subparagraph (B), receive payments covered under
> subsections (b) and (c) if-
>
> "(i) the payments are received with respect to land that is share
> leased to a private party;
>
> "(ii) the lease was in effect on the date of enactment of *farm bill
> 2007;* and
>
> "(iii) the land is used to maintain a public school.
>
> "(8) [changes in farming operations.]{.smallcaps}-In the
> administration of this subtitle, the Secretary may not approve any
> change in a farming operation that otherwise will increase the number
> of persons to which the limitations under this section are applied
> unless the Secretary determines that the change is bona fide and
> substantive. The addition of a family member to a farming operation
> under the criteria set out in section 1602 shall be considered a bona
> fide and substantive change in the farming operation.
>
> "(9) [denial of program benefits]{.smallcaps}.-
>
> "(A) [two year denial of payment]{.smallcaps}.-A person or legal
> entity shall be ineligible to receive payments specified in
> subsections (b) and (c) for that year, and the succeeding crop year,
> in which the Secretary determines that the person or entity engaged in
> an activity in which the primary purpose of the activity was to avoid
> the application of the provisions of this subtitle to the person,
> legal entity or any other person or legal entity.
>
> "(B) [extended ineligibility]{.smallcaps}.-If the Secretary determines
> that a person or legal entity, for their benefit or the benefit of any
> other person or legal entity, has knowingly engaged in, or aided in
> the creation of fraudulent documents, the failure to disclose material
> information relevant to the administration of this subtitle, or the
> commission of other similar actions as identified in regulations
> issued by the Secretary, the Secretary may for a period not to exceed
> five crop years deny the issuance of payments to the person or legal
> entity.
>
> "(C) [pro rata denial]{.smallcaps}.-Payments otherwise owed to a
> person or legal entity covered by subparagraphs (A) or (B) shall be
> denied in a pro rata manner based upon the ownership interest of the
> person or legal entity in a farm, and payments otherwise payable to
> the person or legal entity who is a cash rent tenant on a farm owned
> or under the control of such person or legal entity shall be denied.
>
> "(10) [Death of owner]{.smallcaps}.-In the event of a transfer of any
> ownership interest in land or a commodity as the result of the death
> of a program participant, the new owner of such land or commodity may,
> if such person is otherwise eligible to participate in the applicable
> program, succeed to the prior owner's contract and receive payments
> subject to this section without regard to the amount of payments
> received by the new owner. Payments made pursuant to this subsection
> shall not exceed the amount to which the previous owner was entitled
> to receive under the terms of the contract at the time of the death of
> the prior owner.

"(f) [applicability of other statutes]{.smallcaps}.-The provisions of
this subtitle are in addition to and not in lieu of any other provision
of law.".

"**SEC. 1602. ACTIVELY ENGAGED IN FARMING.**

"(a) [applicability to conservation]{.smallcaps}.-

"(1) [in general]{.smallcaps}.-This section shall not apply to persons
and legal entities participating in conservation programs described in
section 1601(c).

"(2) [Eligibility]{.smallcaps}.-A person or legal entity shall be
eligible for a payment under a program described in section 1601(c) if
the person or legal entity-

> "(A) satisfies the eligibility criteria of the program, as determined
> by the Secretary; and
>
> "(B) has not received payments under the program in any fiscal year
> that exceed the maximum payment amounts described in section 1601(c).

"(b) [actively engaged]{.smallcaps}.-

> "(1) [in general]{.smallcaps}.-To be eligible to receive a payment
> under section 1601(b), a person or legal entity must be actively
> engaged in farming as provided in this subsection or subsection (c).
>
> "(2) [classes actively engaged]{.smallcaps}.-Except as provided in
> subsections (c) and (d)-
>
> "(A) a person, including a person participating in a farming operation
> as a partner in a general partnership, a participant in a joint
> venture, a grantor of a revocable trust, or a participant in a similar
> entity as determined by the Secretary, shall be considered to be
> actively engaged in farming with respect to a farm operation if--
>
> "(i) the person makes a significant contribution (based on the total
> value of the farming operation) to the farming operation of-
>
> "(I) capital, equipment, or land; and
>
> "(II) personal labor or active personal management;
>
> "(ii) the person's share of the profits or losses from the farming
> operation is commensurate with the contributions of the person to the
> farming operation; and
>
> "(iii) the contributions of the person are at risk;
>
> "(B) a legal entity that is a corporation, joint stock company,
> association, limited partnership, charitable organization, or other
> similar entity determined by the Secretary, including any such entity
> participating in the farming operation as a partner in a general
> partnership, a participant in a joint venture, a grantor of a
> revocable trust, or as a participant in a similar entity as determined
> by the Secretary shall be considered as actively engaged in farming
> with respect to a farming operation if-
>
> "(i) the entity separately makes a significant contribution (based on
> the total value of the farming operation) of capital, equipment, or
> land;
>
> "(ii) the stockholders or members collectively make a significant
> contribution of personal labor or active personal management to the
> operation; and
>
> "(iii) the standards provided in clauses (ii) and (iii) of paragraph
> (A), as applied to the entity, are met by the entity;
>
> "(C) if a legal entity that is a general partnership, joint venture,
> or similar entity, as determined by the Secretary, separately makes a
> significant contribution (based on the total value of the farming
> operation involved) of capital, equipment, or land, and the standards
> provided in clauses (ii) and (iii) of paragraph (A), as applied to the
> entity, are met by the entity, the partners or members making a
> significant contribution of personal labor or active personal
> management shall be considered to be actively engaged in farming with
> respect to the farming operation involved.
>
> "(D) in making determinations under this subsection regarding
> equipment and personal labor, the Secretary shall take into
> consideration the equipment and personal labor normally and
> customarily provided by farm operators in the area involved to produce
> program crops.

"(c) [special classes actively engaged]{.smallcaps}.-

"(1) [landowner]{.smallcaps}.-A person or legal entity that is a
landowner contributing the owned land to a farming operation shall be
considered to be actively engaged in farming with respect to the farming
operation if the landowner receives rent or income for such use of the
land based on the land\'s production or the operation\'s operating
results, and the person or legal entity meets the standard provided in
clauses (ii) and (iii) of subsection(b)(2)(A).

"(2) [adult family member]{.smallcaps}.-With respect to a farming
operation when a majority of the participants are family members, an
adult family member shall be considered to be actively engaged in
farming with respect to the farming operation if the person-

> "(A) makes a significant contribution, based on the total value of the
> farming operation, of active personal management or personal labor;
> and
>
> "(B) such contribution meets the standards provided in clauses (ii)
> and (iii) of subsection (b)(2)(A).
>
> "(3) [sharecropper]{.smallcaps}.-A sharecropper who makes a
> significant contribution of personal labor to a farming operation
> shall be considered to be actively engaged in farming with respect to
> the farming operation if such contribution meets the standards
> provided in clauses (ii) and (iii) of subsection(b)(2)(A).
>
> "(4) [growers of hybrid seed]{.smallcaps}.-In determining whether a
> person or legal entity growing hybrid seed under contract shall be
> considered to be actively engaged in farming, the Secretary shall not
> take into consideration the existence of a hybrid seed contract.
>
> "(5) [custom farming services]{.smallcaps}. A person or legal entity
> receiving custom farming services will be considered separately
> eligible for payment limitation purposes if such person or legal
> entity is actively engaged in farming based on subsection (b)(2) or
> paragraphs (1)-(5). No other rules with respect to custom farming
> shall apply in making a determination under this section.

"(d) [classes not actively engaged]{.smallcaps}.-

> "(1) [cash rent landlord]{.smallcaps}.-A landlord contributing land to
> a farming operation shall not be considered to be actively engaged in
> farming with respect to the farming operation if the landlord receives
> cash rent, or a crop share guaranteed as to the amount of the
> commodity to be paid in rent, for such use of the land.
>
> "(2) [other persons]{.smallcaps}.-Any other person determined by the
> Secretary as failing to meet the standards set out in subsections
> (b)(2) and (c) shall not be considered to be actively engaged in
> farming with respect to a farming operation.".

"**SEC. 1603 ADJUSTED GROSS INCOME LIMITATION.**

"(a) [adjusted gross income limitations]{.smallcaps}.-

> "(1) [commodities]{.smallcaps}.- A person or legal entity shall not be
> eligible to receive a payment described in section 1601(b) during a
> year if the average adjusted gross income of the person or legal
> entity for the preceding 3 years exceeds \$200,000, as determined by
> the Secretary.
>
> "(2) [conservation.]{.smallcaps}-A person or legal entity shall not be
> eligible to receive any payment provided under subtitle D of title XII
> of the Food Security Act of 1985 (16 U.S.C. 3801 et seq.) (except the
> Emergency Landscape Restoration Program in section 1240R of that Act)
> during a year if the average adjusted gross income of the person or
> legal entity for the preceding 3 years exceeds \$2,500,000, unless not
> less than 75 percent of the average adjusted gross income of the
> person or legal entity is derived from farming, ranching, or forestry
> operations, as determined by the Secretary.

"(b) [Special rules.-]{.smallcaps}

> "(1) [regulations]{.smallcaps}.-The Secretary shall issue regulations
> that provide a method to determine average adjusted gross income in
> the case of a-
>
> "(A) legal entity that is not required to file a Federal income tax
> return; or
>
> "(B) person or legal entity that did not have taxable income in one or
> more of the tax years used to determine the average adjusted gross
> income as provided in section 1601(a)(1).

"(2) [Certification]{.smallcaps}.-A person or legal entity shall provide
to the Secretary-

> "(A) certification by a certified public accountant or another third
> party that the average adjusted gross income of the person or legal
> entity does not exceed the limitation specified in paragraphs (1) and
> (2) of subsection (a); or
>
> "(B) other information and documentation regarding the adjusted gross
> income of the person or legal entity.
>
> "(3) [Commensurate Reduction]{.smallcaps}-In the case of a benefit
> described in section 1601(b) or (c) that is made in a year to a legal
> entity, the amount of the benefit shall be reduced by an amount that
> is commensurate with the direct and indirect ownership interest in the
> legal entity of each person who has an average adjusted gross income
> in excess of the limitation specified in paragraph (1) or (2) of
> subsection (a).
>
> "(4) [husband and wife]{.smallcaps}.-The adjusted gross income of a
> husband shall be considered separate from the adjusted gross income of
> the wife of the husband if, prior to the marriage of the husband and
> wife, each spouse was separately engaged in unrelated farming
> operations and, after their marriage, the farming operations remain as
> separate farming operations.

"(c) [denial of program benefits]{.smallcaps}.-

> "(1) [two year denial of payment]{.smallcaps}.-A person or legal
> entity shall be ineligible to receive payments covered under in
> subsections (b) and (c) for that year, and the succeeding crop year,
> in which the Secretary determines that the person or entity engaged in
> an activity in which the primary purpose of the activity was to avoid
> the application of the provisions of this section to the person, legal
> entity or any other person or legal entity.
>
> "(2) [extended ineligibility]{.smallcaps}.-If the Secretary determines
> that a person or legal entity, for their benefit or the benefit of any
> other person or legal entity, has knowingly engaged in, or aided in
> the creation of fraudulent documents, the failure to disclose material
> information relevant to the administration of this section, or the
> commission of other similar actions as identified in regulations
> issued by the Secretary, the Secretary may for a period not to exceed
> five crop years deny the issuance of payments to the person or legal
> entity.
>
> "(3) [pro rata denial]{.smallcaps}.-Payments otherwise owed to a
> person or legal entity covered by paragraphs (1) or (2) shall be
> denied in a pro rata manner based upon the ownership interest of the
> person or legal entity in a farm, and payments otherwise payable to
> the person or legal entity who is a cash rent tenant on a farm owned
> or under the control of such person or legal entity shall be denied.";
> and
>
> \(2\) [program benefits]{.smallcaps}.
>
> \(A\) Section 1001C of the Food Security Act of 1985 (7 U.S.C. 1308-3)
> is redesignated as section 1604 of the Farm Security and Rural
> Investment Act of 2002 (as amended by *farm bill 2007*);
>
> \(B\) moved so as to appear after section 1603 of the Farm Security
> and Rural Investment Act of 2002 (as amended by *farm bill 2007*); and

\(C\) Section 1604 (as redesignated by subparagraph (A)) is further
amended-

\(i\) by striking the section heading and inserting "ELIGIBILITY"; and

\(ii\) in subsection (b)-

\(I\) by striking the subsection heading and inserting "LEGAL ENTITIES";

> \(II\) in the first sentence by striking "corporation or other entity"
> and inserting "legal entity"; and
>
> \(III\) in the second sentence by striking "entity" each time it
> appears and inserting "legal entity".

\(b\) Subtitle F of the Farm Security and Rural Investment Act of 2002
(7 U.S.C. 7991 et seq.) is amended by adding at the end:

**"SEC. 1605. TRANSITION PERIOD.**

"(a) [in general]{.smallcaps}.-The Secretary shall issue regulations-

"(1) to implement the provisions of this subtitle in a manner that the
Secretary determines to provide a fair and equitable transition from the
rules in effect upon date of enactment of this Act to those rules
necessary for the administration of this subtitle;

"(2) to strengthen rules concerning the active management contribution,
which enables persons or legal entities to qualify for commodity program
benefits without contributing labor to a farm; and

"(3) to implement new procedures for validating the adjusted gross
income of a person or legal entity to help ensure that no erroneous
payments are made.".

\(c\) [conforming amendment]{.smallcaps}.-

> \(1\) Sections 1001-1001F of the Food Security Act of 1985 (7
> U.S.C.1308-1308-5) are repealed.