FACT SHEET

UNITED STATES DEPARTMENT OF AGRICULTURE

FARM SERVICE AGENCY

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April 2011

 Tobacco Transition Payment Program (known as the “Tobacco Buyout”)

Overview

On Oct. 22, 2004, President 

Bush signed the American Jobs 

Creation Act of 2004, which 

included the Fair and Equitable 

Tobacco Reform, commonly 

referred to as the “Tobacco 

Buyout.” USDA, which is 

charged with administering the 

program, titled it the Tobacco 

Transition Payment Program 

(TTPP).

All aspects of federal tobacco 

marketing quota and price 

support loan programs have 

ended. Beginning with the 

2005 tobacco crop, there were 

no planting restrictions, no 

marketing cards and no price 

support loans. Signing up for 

the TTPP is the final and only 

opportunity to receive federal 

payments related to tobacco 

marketing quotas.

TTPP provides payments to 

tobacco quota holders and 

tobacco producers.

TTPP payments began in 2005 

for those who signed up during 

the Mar. 14 - June 17, 2005, 

enrollment period. Sign up for 

the program is voluntary and 

is continuous through 2014 to 

allow those who missed the 

original signup to receive all 

future payments.

TTPP payments were made 

from June to September 2005, 

for fiscal year 2005. Subsequent 

payments in future years will be 

issued annually during January, 

but not later than Sept. 30.

If a producer grew tobacco 

in more than one county, the 

producer must sign up for TTPP 

in each respective county.

 

Eligibility and Payments for 

Quota Holders

 

Quota holders are the 

landowners of the farm where 

a tobacco quota was assigned. 

Eligible TTPP quota holders are 

farm owners with an established 

2004 basic marketing quota 

on a farm as of Oct. 22, 2004. 

Quota holders who purchased 

a farm after this date are 

eligible to receive this payment. 

Eligible tobacco quota holders 

receive $7 per pound based on 

their basic quota at the 2002 

marketing year level.

To prove ownership of TTPP 

signup, a copy of the deed, 

contract for deed, last will or 

other documents that provide 

proof of legal ownership must 

be provided to the local USDA 

Service Center. Parties that 

have agreed to the distribution 

of the quota in writing must also 

provide a copy of the agreement 

to the local USDA Service 

Center before approval of TTPP 

contract signup.

If a new farm allotment or quota 

was established on the farm 

in crop year 2003 or 2004, the 

quota holder is not eligible for a 

TTPP payment.

If the quota holder is deceased, 

then the payment transfers to 

the surviving spouse. If there 

is no surviving spouse, then 

the right to receive payment 

transfers to the estate of the 

quota holder.

Tobacco quota farms with an 

existing Conservation Reserve 

Program (CRP) contract are 

eligible for payments.

 

Eligibility and Payments for 

Producers

 

Producers include owners, 

operators, landlords, tenants 

or sharecroppers who shared 

production risk during any of the 

2002, 2003 or 2004 marketing 

years.

Producers of quota tobacco 

receive up to $3 per pound 

based on their share of risk in 

2002, 2003 and 2004 quota 

crops.

Annual payment is calculated 

by multiplying the eligible 

producer’s Base Quota Level 

(BQL) for each farm for crop 

years 2002, 2003 or 2004 by 

$0.10 per pound per year. For 

flue-cured and burley producers, 

the BQL is equal to the 2002 

effective quota produced on 

the farm. For tobacco other 

than flue-cured and burley, the 

producer’s BQL is equal to the 

2002 basic allotment multiplied 

by the farm’s three-year average 

yield for 2001, 2002 and 2003.

To determine an individual share 

of the farm’s BQL, FSA uses the 

producer’s share information 

on the contract in Form FSA578, Report of Acreage, for the 

applicable year. Producers may 

change the share percentages. 

However, all parties must agree 

to the division of quota shares, 

not to exceed 100 percent.

If a producer did not share in 

crop year 2002, but did share in 

crop years 2003 and 2004, that 

producer is eligible for payment 

for that producer’s share in 2003 

and 2004 crops.

If the producer is deceased, 

the right to receive the payment 

transfers to the surviving 

spouse. If there is no surviving 

spouse, the right to receive 

payment transfers to the estate 

of the producer.
FACT SHEET

Tobacco Transition Payment Program (TTPP) April 2011

For TTPP contract eligibility, 

producers must have complied 

each year with statutory 

provisions for 2002-2004, 

relating to Highly Erodible 

Land Conservation/Wetland 

Conservation. Substance 

Control provisions apply to 

each year of the contract. Any 

successor-in-interest to the 

contract must also comply with 

these provisions.

Payments

 

Contract payments to tobacco 

quota holders and producers 

are made in annual installments 

over a 10-year period. Payments 

began in 2005 and end Sept. 30, 

2014.

Payments are made in January 

of each year to the extent 

practicable.

TTPP payments are subject 

to administrative offset under 

provisions set forth in the Debt 

Collection Improvement Act 

of 1996, which means FSA 

will collect a producer’s TTPP 

payments and apply these 

payments to debts owed to FSA 

and other federal agencies. 

Payment limitation provisions 

do not apply to TTPP producer 

payments.

The funds required to pay 

for TTPP and other related 

costs are obtained through 

assessments on manufacturers 

and importers of all tobacco 

products totaling no more than 

$10.14 billion over the 10-year 

period.

Lump-sum Payments, 

Assignments and Successorin-interest Contracts

 

The Commodity Credit 

Corporation (CCC) will not 

make a lump-sum payment 

to individual tobacco quota 

holders or producers, but a 

private party may. If a private 

party enters into an agreement 

where an individual quota 

holder or tobacco producer is 

to receive a lump-sum payment 

from them in return for the 

individual’s rights to TTPP 

payment, the private party will 

likely request that either the 

contract payment be assigned 

to them as the payments are 

earned over 10 years, or they 

will request that all rights be 

transferred to them by executing 

a successor-in-interest contract 

with the other private party 

and CCC. Assignment forms 

are available from local USDA 

Service Centers. They explain 

how to transfer TTPP payments 

from CCC to another party. 

The successor-in-interest form 

is available from private-party 

participants or the FSA.

For payments to be issued to a 

successor the following January 

for the 2001 and successive 

year payments, the successor 

must file a successor-in-interest 

contract no later than Nov. 1 of 

the preceding year. 

Types of Eligible Quota 

Tobacco

 

The types of tobaccos provided 

for in the buyout bill and 

the states in which they are 

produced include:

 

• Flue-cured (types 11-14): 

Alabama, Florida, Georgia, 

North Carolina, South 

Carolina and Virginia;

• Burley (type 31): 

Alabama, Arkansas, 

Georgia, Indiana, Kansas, 

Kentucky, Missouri, North 

Carolina, Ohio, Oklahoma, 

Tennessee, Virginia and 

West Virginia;

• Fire-cured (types 21-23): 

Kentucky, Tennessee and 

Virginia;

• Dark air-cured (types 35-

36): Indiana, Kentucky and 

Tennessee;

• Virginia sun-cured (type 

37): Virginia; and

• Cigar filler/binder (types 

42-44 and 54-55): 

Wisconsin.

 

For tobaccos other than fluecured and burley, yield is 

determined by the average yield 

for 2001, 2002 and 2003 for that 

type of tobacco in the county 

in which the allotment was 

assigned.

 

More Information

 

Further information on this and 

other FSA programs is available 

from the local USDA Service 

Centers or on the FSA Web 

site at: www.fsa.usda.gov. You 

can also visit the USDA/FSA 

Tobacco Web site at www.fsa.

usda.gov/tobacco.

The U.S. Department of Agriculture 

(USDA) prohibits discrimination in all 

of its programs and activities on the 

basis of race, color, national origin, 

age, disability, and where applicable, 

sex, marital status, familial status, 

parental status, religion, sexual 

orientation, political beliefs, genetic 

information, reprisal, or because all 

of part of an individual’s income is 

derived from any public assistance 

program. (Not all bases apply to all 

programs.) Persons with disabilities 

who require alternative means for 

communication of program information 

(Braille, large print, audiotape, etc.) 

should contact USDA’s TARGET 

Center at (202) 720-2600 (voice and 

TDD). 

To file a complaint of discrimination, 

write to USDA, Assistant Secretary 

for Civil Rights, Office of the Assistant 

Secretary for Civil Rights, 1400 

Independence Avenue, S.W., Stop 

9410, Washington, DC 20250-9410, 

or call toll-free at (866) 632-9992 

(English) or (800) 877-8339 (TDD) or 

(866) 377-8642 (English Federal-relay) 

or (800) 845-6136 (Spanish Federalrelay). USDA is an equal opportunity 

provider and employer.

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