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**PAYMENT LIMITS**

***Background***

A limitation on the total annual payments that a \"person\" may receive
under certain commodity programs has been in effect since enactment of
the Agricultural Act of 1970. Subsequent farm legislation has continued
payment limitation requirements, and has added various income
limitations; most notably the 2002 farm bill added a \$2.5 million
average adjusted gross income (AGI) limitation with respect to these
programs.

A \"person,\" for payment limitation purposes, may include an
individual; a limited liability partnership; a limited liability
company; a corporation; a joint stock company; an association; a limited
stock company; a limited partnership; an irrevocable trust; a revocable
trust together with the grantor of the trust; an estate; a charitable
organization; and a State, political subdivision, or agency thereof. For
an individual or entity to be considered a separate \"person,\" the
individual or entity must: have a separate and distinct interest in the
land or crop involved; exercise separate responsibility for this
interest; and maintain funds or accounts separate from that of any other
individual or entity for this interest.

In addition to the "person" determination, many programs require that
the individual or entity be \"actively engaged in farming\" to be
eligible to receive program benefits. Programs requiring an \"actively
engaged in farming\" determination are Direct and Counter-Cyclical
Payments (DCP), Marketing Assistance Loans and Loan Deficiency Payments,
National Dairy Market Loss Payments, and the Conservation Reserve
Program (CRP). To be \"actively engaged in farming\" requires the
significant contributions of land, capital, or equipment or a
combination of the three, and active personal labor or active personal
management or a combination of both. These contributions must be at risk
and commensurate with the claimed share of profits and/or losses of the
farming operation.

The following programs are subject to payment limitation and eligibility
provisions. Listed after each program are the applicable payment
limitations for 2006.

+----------------------------------+-----------------------------------+
| **Benefits, Payments and         |                                   |
| Limitations**                    |                                   |
+----------------------------------+-----------------------------------+
| **Direct and Counter-cyclical    |                                   |
| Payments**                       |                                   |
+----------------------------------+-----------------------------------+
| ***Payment or Benefit***         | ***Limitation Per Person***       |
+----------------------------------+-----------------------------------+
| Direct payments for the          |                                   |
| following covered commodities:   |                                   |
| barley, corn, grain, oats, other | \$40,000 per crop year            |
| oilseeds, rice, sorghum,         |                                   |
| soybeans, upland cotton, and     |                                   |
| wheat.                           |                                   |
+----------------------------------+-----------------------------------+
| Direct payments for peanuts      | \$40,000 per crop year            |
+----------------------------------+-----------------------------------+
| Counter-cyclical payments for    |                                   |
| the following covered            |                                   |
| commodities: barley, corn,       | \$65,000 per crop year            |
| grain, oats, other oilseeds,     |                                   |
| rice, sorghum, soybeans, upland  |                                   |
| cotton, and wheat.               |                                   |
+----------------------------------+-----------------------------------+
| Counter-cyclical payments on     | \$65,000 per crop year            |
| peanuts                          |                                   |
+----------------------------------+-----------------------------------+

+----------------------------------+-----------------------------------+
| **Price Support**                |                                   |
+----------------------------------+-----------------------------------+
| ***Payment or Benefit***         | ***Limitation Per Person***       |
+----------------------------------+-----------------------------------+
| Any gain realized from repaying  |                                   |
| a marketing assistance loan for  |                                   |
| one or more of the following     |                                   |
| loan commodities at a lower      |                                   |
| level than the original loan     |                                   |
| rate established for the loan    |                                   |
| commodity.                       | \$75,000 per crop year            |
|                                  |                                   |
| Any Loan Deficiency Payments     |                                   |
| (LDPs) received for one or more  |                                   |
| of the following loan            |                                   |
| commodities.                     |                                   |
|                                  |                                   |
| Loan commodities include:        |                                   |
| barley, corn, grain, oats, other |                                   |
| oilseeds, rice, sorghum,         |                                   |
| soybeans, upland cotton, and     |                                   |
| wheat.                           |                                   |
+----------------------------------+-----------------------------------+
| Any gain realized from repaying  |                                   |
| a marketing assistance loan for  |                                   |
| honey, peanuts, mohair, or wool  |                                   |
| at a lower level than the        |                                   |
| original loan rate established   | \$75,000 per crop year            |
| for the loan commodity.          |                                   |
|                                  |                                   |
| Any LDPs received for one or     |                                   |
| more of the following loan       |                                   |
| commodities: honey, peanuts,     |                                   |
| mohair, or wool.                 |                                   |
+----------------------------------+-----------------------------------+
| **Conservation Programs**        |                                   |
+----------------------------------+-----------------------------------+
| ***Payment or Benefit***         | ***Limitation Per Person***       |
+----------------------------------+-----------------------------------+
|                                  |                                   |
+----------------------------------+-----------------------------------+
| Rental payments, including       | \$50,000 per fiscal year          |
| incentive payments made under    |                                   |
| the Conservation Reserve Program |                                   |
| (CRP).                           |                                   |
+----------------------------------+-----------------------------------+
|                                  | \$450,000 per individual or       |
|                                  | entity                            |
|                                  |                                   |
|                                  | EQIP payments are not limited on  |
| Cost-share and incentive         | a per \"person\" basis. Instead,  |
| payments under Environmental     | an individual or entity may not   |
| Quality Incentives Program       | receive, directly or indirectly,  |
| (EQIP)                           | cost-share or incentive payments  |
|                                  | under EQIP that exceed \$450,000, |
|                                  | in aggregate, for all contracts   |
|                                  | entered into during FYs 2002      |
|                                  | through 2007, regardless of the   |
|                                  | number of contracts entered into  |
|                                  | by the individual or entity.      |
+----------------------------------+-----------------------------------+
| **NAP**                          |                                   |
+----------------------------------+-----------------------------------+
| ***Payment or Benefit***         | ***Limitation Per Person***       |
+----------------------------------+-----------------------------------+
| Noninsured Crop Disaster         | \$100,000 per crop year           |
| Assistance Program (NAP)         |                                   |
| payments                         |                                   |
+----------------------------------+-----------------------------------+

***General Opinions Expressed***

-   Most respondents generally agreed that effective and enforceable
    payment limitations are necessary, particularly in consideration of
    budget constraints.

-   The exact amounts of the limits and the methods for FSA to impose
    the limitations varied greatly. Ideas ranged from limits by specific
    crop or commodity; limits controlled strictly by individual social
    security number; limits per crop acre; or limits based on farm
    income.

-   Some commenters suggested that the current payment limitation levels
    should be lowered, while others maintained they should be increased.

-   Many commenters said that currently, the payment limitations are set
    too high and were the reason for the demise of the family farm and
    rural communities.

-   Other commenters believed that the current payment limitation rules
    should be retained because stricter payment limitation rules would
    only harm agriculture through the resulting decrease in Federal
    support dollars received by producers.

-   A few commenters offered that all payment limitation rules should be
    eliminated because they work against the trend of farm consolidation
    and production efficiency.

-   Other commenters suggested that USDA should not discriminate against
    large, corporate farms. Family farms are now commonly also corporate
    farms. Do not penalize farmers for growing.

-   A commonly held opinion was that restrictions must be established to
    prevent nonfarmers from receiving Government farm support payments.

-   A few commenters offered that rice farms require a significant
    capital investment and that reduced payment limitations would harm
    the family farm operations in the rice-growing regions.

-   A few commenters offered that limits on payments are necessary to
    restore public confidence in the need for farm programs.

    ***Detailed Suggestions Expressed***

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-   Payment limitations could be more effectively and economically
    administered if the eligibility forms were consolidated into as few
    as possible.

-   Farmers should be subsidized first and foremost as individuals. This
    would create smaller farms run by individuals.

-   The cap should be lowered from \$360,000 to \$250,000 per person per
    year, and the gaping loophole that allows some farmers to receive up
    to a million dollars in subsidies every year should be closed.

-   Correct the current fiasco of payment limitation loopholes and it
    will immediately slow down the demise of the family farm. The
    systematic destruction of the family and small towns is due to lack
    of enforceable payment limits.

-   Limit assistance to large farms according to their income.

-   The pay cap must be lower than \$250,000 for one farmer.

-   Total payments for commodity support programs should be capped at
    \$250,000 per farm per year, and all loopholes must be closed. The
    Environmental Quality Incentives Program (EQIP) should be capped at
    \$150,000 per 5-year contract.

-   The current payment limitation should be reduced and the
    three-entity rule done away with. One payment per farmer is enough.

-   Cap farm subsidies at \$250,000 per individual farm and get rid of
    the three-entity rule. A family farm is one farm, not three
    corporations. Close the loophole that allows big farms to receive
    triple payments.

-   Eliminate ambiguous multiple-eligibility loopholes and virtually
    unbridled farm program payment levels that lead to accelerated
    concentration and consolidation in agriculture.

-   Significant savings could be realized if payments went only to
    farmers who receive a significant portion of their income from
    farming.

-   A payment limitation per commodity would help. Corn and soybean
    farmers do not need caps as high as cotton farmers. FSA should
    discourage payment limitation fraud more aggressively.

-   Payment limits should be established for each person under their
    social security number and the amount of support should be
    sufficient for a 1,500-acre corn and soybean operation.

-   Loopholes like the triple-entity rule should be eliminated. There
    should be no way to receive money through multiple entities and
    multiple limits.

-   A landowner collecting payments without a crop growing on the land
    should not be considered actively engaged in farming.

-   Remove all subsidies from any entity with more than 1,000 acres of
    crops.

-   The current farm program eligibility rules do not recognize the
    modern realities of agricultural lending practices. The new farm
    bill must have eligibility requirements structured so they do not
    penalize farmers and lenders.

-   Assistance must be limited to only noncorporate farms.

-   Agriculture would be harmed by more restrictive payment limits.

-   Payment limits should be based on income levels adjusted for farm
    size. The producers that do not need the help should not receive it.

-   Lower the payment limitation to \$250,000 for one permitted entity
    and attribute payments to a social security number rather than a
    corporation tax ID.

-   Cap farm subsidy payments at \$250,000 to prevent cuts in nutrition
    assistance.

-   Program payments should have a reasonable cap based on what one farm
    entity can receive.

-   The next farm bill should retain the current payment limitation
    structure as any cuts would devastate the majority of peanut and
    cotton farming operations.

-   A \$250,000 payment limitation should be imposed with assistance
    tailored to meet the needs of medium- to small-size producers.

-   More restrictive payment limits would hurt our international
    competitiveness and are not in the best interest of United States
    agriculture.

-   The specialty crop producer should have a different payment
    limitation than the traditional crop producer, due to the high input
    costs.

-   The regulations should be tightened to better define the significant
    contribution of active personal management and to prevent the
    doubling of payments by large mega-interests.

-   Payment limitation rules need to verify the real farmers versus the
    "paper" farmers.

-   Means-testing for eligibility or to restrict participation in the
    Federal farm programs should be opposed.

-   One payment limitation per individual should be allowed, period.
    Multiple-entity involvement is making a mockery out of payment
    limitations.

-   The payment limitation should not exceed \$200,000 and should be
    attributed to the social security number of the individual.

-   Making a single payment to a social security number would make the
    bookwork simpler at FSA and would discourage the creation of
    enterprises to circumvent payment limitation.

-   Many family farms are incorporated for liability reasons and,
    therefore, any payment limitation should not restrict payments to
    entities.

-   Enact the Grassley-Dorgan payment limitations bill. Restore
    effective payment limitations to EQIP and do not allow expansion of
    EQIP to concentrated livestock production.

-   Farm subsidies should be limited to \$100,000 per farmer for all
    crops and livestock products.

-   The next farm bill should adopt a more reasonable, middle-ground
    solution of payment limits to accomplish budget savings while
    maintaining the network of family farms.

-   Farm program payments should be limited only to family farms, and
    corporate farms should not get a penny.

-   Pay limits are needed and someone is needed to enforce them. A new
    definition of the word "producer" in the USDA vocabulary should be
    found.