§ 760.1903 Allowable gross revenue. ( a ) For the purposes of this subpart, “allowable gross revenue” includes revenue from: ( 1 ) Sales of eligible crops produced by the producer, which includes sales resulting from value added through post-production activities that were reportable on IRS Schedule F;
( 2 ) Sales of eligible crops a producer purchased for resale that had a change in characteristic due to the time held (for example, a plant purchased at a size of 2 inches and sold as an 18-inch plant after 4 months), less the cost or other basis of such eligible crops;
( 3 ) The taxable amount of cooperative distributions directly related to the sale of the eligible crops produced by the producer;
( 4 ) Benefits for eligible crops under the following agricultural programs: 2017 WHIP, ARC and PLC, BCAP, LDP, MLG, MFP, the On-Farm Storage Loss Program, and STRP;
( 5 ) CCC loans for eligible crops, if treated as income and reported to IRS;
( 6 ) Crop insurance proceeds for eligible crops, minus the amount of administrative fees and premiums;
( 7 ) NAP payments for eligible crops, minus the amount of service fees and premiums;
( 8 ) ELAP payments for an aquaculture crop;
( 9 ) Payments issued through grant agreements with FSA for losses of eligible crops;
( 10 ) Grants from the Department of Commerce, National Oceanic and Atmospheric Administration and State program funds providing direct payments for the loss of eligible crops or the loss of revenue from eligible crops;
( 11 ) Other revenue directly related to the production of eligible crops that IRS requires the producer to report as income;
( 12 ) For the disaster year only, ERP Phase 1 payments issued to another person or entity for the producer's share of an eligible crop, regardless of the tax year in which the payment would be reported to IRS; and
( 13 ) For the benchmark year only, 2018, 2019 and 2020 WHIP+ and QLA payments.
( b ) Allowable gross revenue does not include revenue from sources other than those listed in paragraph (a) of this section, including but not limited to, revenue from: ( 1 ) Federal assistance programs not included in paragraph (a) of this section;
( 2 ) Sales of livestock, animal by-products, and any commodities that are excluded from “eligible crops”;
( 3 ) Resale items not held for characteristic change;
( 4 ) Income from a pass-through entity such as an S Corp or limited liability company;
( 5 ) Conservation program payments;
( 6 ) Any pandemic assistance payments that were not for the loss of eligible crops or the loss of revenue from eligible crops;
( 7 ) Custom hire income;
( 8 ) Net gain from hedging or speculation;
( 9 ) Wages, salaries, tips, and cash rent;
( 10 ) Rental of equipment or supplies; and
( 11 ) Acting as a contract producer of an agricultural commodity.
( c ) A producer is required to certify to an adjusted allowable gross revenue for the benchmark year on FSA-521 if the producer had a decreased operation capacity in a disaster year for which they are applying for ERP Phase 2, compared to the benchmark year.
( d ) A producer may certify to an adjusted allowable gross revenue for the benchmark year on FSA-521 if either of the following apply: ( 1 ) The producer did not have a full year of revenue for 2018 or 2019; or
( 2 ) The producer had expanded their operation capacity in a disaster year for which they are applying for ERP Phase 2, compared to the benchmark year.
( e ) Change in operation capacity does not include crop rotation from year to year, changes in farming practices such as converting from conventional tillage to no-till, or increasing the rate of fertilizers or chemicals. If requested by FSA, producers are required to submit documentation to FSA to support adjustments described in paragraphs (c) and (d) of this section within 30 calendar days of the request. The documentation to support an adjustment due to a change in operation capacity must show that the adjustment to the producer's benchmark revenue is due to an: ( 1 ) Addition or decrease in production capacity of the farming operation;
( 2 ) Increase or decrease in the use of existing production capacity; or
( 3 ) Physical alterations that were made to existing production capacity.
( f ) If a producer began farming in 2020 or 2021 and did not have allowable gross revenue in a benchmark year, the producer may certify to an adjusted benchmark allowable gross revenue on form FSA-521 that represents what had been the producer's reasonably expected disaster year revenue prior to the impact of the qualifying disaster event. If requested by FSA, documentation required to support a producer's certification must be provided within 30 calendar days of FSA's request, or the producer will be considered ineligible for ERP Phase 2. Acceptable documentation must be generated in the ordinary course of business and dated prior to the impact of the disaster event and includes, but is not limited to: ( 1 ) Financial documents such as a business plan or cash flow statement that demonstrate an expected level of revenue;
( 2 ) Sales contracts or purchase agreements; and
( 3 ) Documentation supporting production capacity, use of existing production capacity, or physical alterations that demonstrate production capacity.
( g ) The allowable gross revenue will be based on the year for which the revenue would be reported for the purpose of filing a tax return, except for the ERP Phase 1 payments specified in paragraph (a)(12) of this section.
( h ) Producers who file or would be eligible to file a joint tax return will certify their allowable gross revenue based on what it would have been had they filed taxes separately for the applicable year.
( i ) On form FSA-521, for each applicable disaster year, producers must indicate the percentage of their allowable gross revenue from specialty and high value crops and the percentage from other crops. The percentages certified must be equal to the percentages that the producer would have reasonably expected to receive for the disaster year if not for the qualifying disaster event.
( j ) The Deputy Administrator may determine that certain eligible crops produced by a producer that do not generate revenue for the producer directly from the sale of the crop and that the producer uses within their ordinary operation may be included in a producer's allowable gross revenue. This determination is at the Deputy Administrator's discretion. The value of the eligible crop reported in the producer's allowable gross revenue will be based on the producer's actual production of the crop and a price for the crop based on the best available data for each crop, as determined by the Deputy Administrator and published through guidance on FSA's website.
[88 FR 1883, Jan. 11, 2023 as amended at 88 FR 39768, June 20, 2023]