Farm Fairness Act of 1995

Summary: Farm Fairness Act of 1995 - Amends the Food Security Act of 1985 to establish a $35,000 annual agricultural commodity program payment limit (exclusive of conservation payments).  Applies such limit directly to a person based upon percentage of ownership in any related entity. 
Subjects general partnerships and joint ventures to such limit. 
Attributes payments to an entity to the owning person or persons (elimination of three entity rule). 
Revises "actively engaged in farming" eligibility provisions. 
Increases program ineligibility penalties for scheme or device violations.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Farm Fairness Act of 1995''.

SEC. 2. PAYMENT LIMITATIONS.

    (a) In General.--Section 1001 of the Food Security Act of 1985 (7 
U.S.C. 1308) is amended by striking paragraphs (1) through (3) and 
inserting the following:
    ``(1)(A) Subject to sections 1001A through 1001C, for each of the 
1996 and subsequent crops, the total amount of payments specified in 
subparagraph (B) that a person shall be entitled to receive under 1 or 
more of the annual programs established under the Agricultural Act of 
1949 (7 U.S.C. 1421 et seq.) for wheat, feed grains, upland cotton, 
extra long staple cotton, rice, and oilseeds may not exceed $35,000.
    ``(B) In subparagraph (A), the term `payments' means--
            ``(i) deficiency payments;
            ``(ii) land diversion payments;
            ``(iii) any part of any payment that is determined by the 
        Secretary of Agriculture to represent compensation for resource 
        adjustment or public access for recreation;
            ``(iv) any gain realized by a producer from repaying a loan 
        for a crop of any commodity (other than honey) at a lower level 
        than the original loan level established under the Agricultural 
        Act of 1949;
            ``(v) any deficiency payment received for a crop of wheat 
        or feed grains under the Agricultural Act of 1949 as the result 
        of a reduction of the loan level for the crop under the Act;
            ``(vi) any loan deficiency payment received for a crop of 
        wheat, feed grains, upland cotton, rice, or oilseeds under the 
        Agricultural Act of 1949; and
            ``(vii) any inventory reduction payment received for a crop 
        of wheat, feed grains, upland cotton, or rice under the 
        Agricultural Act of 1949.
    ``(2) In applying the limitation specified in paragraph (1)(A) to 
payments specified in paragraph (1)(B):
            ``(A) The Secretary shall attribute the payments directly 
        to persons who receive the payments.
            ``(B) In the case of payments that are received by an 
        entity, the Secretary shall attribute the payments to 
        individuals who own the entity in proportion to the ownership 
        interest of the individuals in the entity.''.

SEC. 3. DEFINITION OF PERSON.

    Section 1001(5)(B)(i)(II) of the Food Security Act of 1985 (7 
U.S.C. 1308(5)(B)(i)(II)) is amended by inserting ``general 
partnership, joint venture,'' after ``limited partnership,''.

SEC. 4. REMOVAL OF 3-ENTITY RULE.

    Subsection (a) of section 1001A of the Food Security Act of 1985 (7 
U.S.C. 1308-1) is amended to read as follows:
    ``(a) Prevention of Creation of Entities to Qualify as Separate 
Persons.--The Secretary shall attribute payments specified in section 
1001(1)(B) to persons in accordance with section 1001(2).''.

SEC. 5. ACTIVELY ENGAGED IN FARMING.

    (a) Personal Labor and Active Personal Management.--
            (1) Individuals.--Section 1001A(b)(2)(A)(i) of the Food 
        Security Act of 1985 (7 U.S.C. 1308-1(b)(2)(A)(i)) is amended 
        by striking subclause (II) and inserting the following:
                                    ``(II) personal labor and active 
                                personal management;''.
            (2) Corporations or other entities.--Section 1001A(b)(2)(B) 
        of the Act is amended to read as follows:
                    ``(B) Corporations or other entities.--
                            ``(i) Significant contribution.--A 
                        corporation or other entity 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) stockholders or members who 
                                individually or collectively own at 
                                least a 50 percent interest in the 
                                operation make a significant 
                                contribution of personal labor and 
                                active personal management to the 
                                operation; and
                                    ``(III) the standards provided in 
                                clauses (ii) and (iii) of subparagraph 
                                (A), as applied to the entity, are met 
                                by the entity.
                            ``(ii) No significant contribution.--
                        Notwithstanding clause (i), if the stockholders 
                        or members who are not described in clause 
                        (i)(II) do not individually or collectively 
                        make a significant contribution of personal 
labor or active personal management to the operation, the payments to 
the entity shall be reduced by a percentage equal to the percentage 
ownership in the entity of the members.
                            ``(iii) Transition rule.--A family farm 
                        corporation shall meet the requirements of 
                        clause (i)(II) during the 10-year period 
                        beginning on October 1, 1996, if--
                                    ``(I) the corporation met the 
                                requirements of this subparagraph (as 
                                in effect prior to the amendment made 
                                by section 5(a)(2) of the Farm Fairness 
                                Act of 1995) during at least the 5-year 
                                period ending on the date of enactment 
                                of the Act;
                                    ``(II) the corporation ceases as a 
                                result of the death, disability, or 
                                retirement of a stockholder or member 
                                of the corporation to meet the 
                                requirements of clause (i)(II); and
                                    ``(III) stockholders or members who 
                                individually or collectively own at 
                                least a 10 percent interest in the 
                                operation make a significant 
                                contribution of personal labor and 
                                active personal management to the 
                                operation.''.
            (3) Entities making significant contributions.--Section 
        1001A(b)(2) of the Act is amended--
                    (A) by striking subparagraph (C); and
                    (B) by redesignating subparagraph (D) as 
                subparagraph (C).
            (4) Family members.--The first sentence of section 
        1001A(b)(3)(B) of the Act is amended by striking ``active 
        personal management or personal labor'' and inserting ``active 
        personal management and personal labor''.
    (b) Landowners.--Section 1001A(b)(3)(A) of the Act is amended to 
read as follows:
                    ``(A) Landowners.--A person that is a landowner 
                contributing the owned land to the farming operation, 
                if the person demonstrates to the satisfaction of the 
                Secretary that the person--
                            ``(i) receives rent for the use of the land 
                        based on the production of the land or the 
                        operating results of the operation;
                            ``(ii) rents the land only to persons who 
                        are considered actively engaged in farming 
                        under this section; and
                            ``(iii) meets the standards provided in 
                        clauses (ii) and (iii) of paragraph (2)(A).''.
    (c) Definitions.--Section 1001A(b) of the Act is amended by adding 
at the end the following:
            ``(7) Definitions.--In this subsection and section 
        1001(5)(D) (7 U.S.C. 1308(5)(D)):
                    ``(A) Active personal management.--The term `active 
                personal management' means personally providing, on a 
                daily basis as required during the entire growing 
                season for a crop--
                            ``(i) direct supervision and direction of 
                        activities and labor involved in a farming 
                        operation; or
                            ``(ii) on-site services that are directly 
                        related and necessary to a farming operation.
                    ``(B) Capital.--The term `capital' does not include 
                any payment described in paragraph (1) or (2) of 
                section 1001 (7 U.S.C. 1308). The Secretary shall 
                establish procedures to ensure that the term is applied 
                in a manner that does not include any such payment.
                    ``(C) Significant contribution.--The term 
                `significant contribution' means--
                            ``(i) in the case of land, capital, or 
                        equipment contributed by a person to an 
                        operation, a percentage of the land, capital, 
                        or equipment, respectively, to the operation 
                        that is at least equal to the percentage 
                        interest of the person in the operation; and
                            ``(ii) in the case of personal labor and 
                        personal active management contributed by a 
                        person to an operation, at least 1,000 hours 
                        annually or 50 percent of the commensurate 
                        share, whichever is less.''.
    (d) Conforming Amendments.--Section 1001(5) of the Act (7 U.S.C. 
1308(5)) is amended--
            (1) by striking subparagraph (D); and
            (2) by redesignating subparagraph (E) as subparagraph (D).

SEC. 6. SCHEMES OR DEVICES.

    Section 1001B of the Food Security Act of 1985 (7 U.S.C. 1308-2) is 
amended by striking ``applicable to'' and all that follows through 
``succeeding crop year'' and inserting ``applicable to--
            ``(1) the crop year for which the scheme or device was 
        adopted and the succeeding 5 crop years; and
            ``(2) if fraud was committed in connection with a scheme or 
        device involving a price support, production adjustment, or 
        conservation program administered by the Secretary of 
        Agriculture, the crop year for which the scheme or device was 
        adopted and the succeeding 10 crop years''.

SEC. 7. EFFECTIVE DATE.

    This Act and the amendments made by this Act shall become effective 
on October 1, 1996.