II 

112TH CONGRESS 

2D SESSION S. 2217 

To amend the Food Security Act of 1985 to restore integrity to and 

strengthen payment limitation rules for commodity payments and benefits. 

IN THE SENATE OF THE UNITED STATES 

MARCH 21, 2012 

Mr. GRASSLEY (for himself, Mr. JOHNSON of South Dakota, Mr. BROWN of 

Ohio, Mrs. GILLIBRAND, Mr. ENZI, Mr. NELSON of Nebraska, and Mr. 

HARKIN) introduced the following bill; which was read twice and referred 

to the Committee on Agriculture, Nutrition, and Forestry 

A BILL 

To amend the Food Security Act of 1985 to restore integrity 

to and strengthen payment limitation rules for commodity payments and benefits. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Rural America Preser5 vation Act of 2012’’. 

6 SEC. 2. PAYMENT LIMITATIONS. 

7 Section 1001 of the Food Security of 1985 (7 U.S.C. 

8 1308) is amended— 

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1 (1) in subsection (a), by striking paragraph (3) 

2 and inserting the following: 

3 ‘‘(3) LEGAL ENTITY.— 

4 ‘‘(A) IN GENERAL.—The term ‘legal entity’ 

5 means— 

6 ‘‘(i) an organization that (subject to 

7 the requirements of this section and sec8 tion 1001A) is eligible to receive a pay9 ment under a provision of law referred to 

10 in subsection (b), (c), or (d); 

11 ‘‘(ii) a corporation, joint stock com12 pany, association, limited partnership, lim13 ited liability company, limited liability 

14 partnership, charitable organization, es15 tate, irrevocable trust, grantor of a rev16 ocable trust, or other similar entity (as de17 termined by the Secretary); and 

18 ‘‘(iii) an organization that is partici19 pating in a farming operation as a partner 

20 in a general partnership or as a participant 

21 in a joint venture. 

22 ‘‘(B) EXCLUSION.—The term ‘legal entity’ 

23 does not include a general partnership or joint 

24 venture.’’; 

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1 (2) by striking subsections (b) through (d) and 

2 inserting the following: 

3 ‘‘(b) LIMITATION ON PAYMENTS FOR COVERED COM4 MODITIES.—The total amount of payments received, di5 rectly or indirectly, by a person or legal entity for any 

6 crop year for 1 or more covered commodities (except for 

7 peanuts) under title I of the Food, Conservation, and En8 ergy Act of 2008 (7 U.S.C. 8701 et seq.) (or a successor 

9 provision) may not exceed $125,000, of which— 

10 ‘‘(1) not more than $75,000 may consist of 

11 marketing loan gains and loan deficiency payments 

12 under subtitle B or C of title I of the Food, Con13 servation, and Energy Act of 2008 (7 U.S.C. 8731 

14 et seq.) (or a successor provision); and 

15 ‘‘(2) not more than $50,000 may consist of any 

16 other payments made for covered commodities under 

17 title I of the Food, Conservation, and Energy Act of 

18 2008 (7 U.S.C. 8702 et seq.) (or a successor provi19 sion). 

20 ‘‘(c) LIMITATION ON PAYMENTS FOR PEANUTS.— 

21 The total amount of payments received, directly or indi22 rectly, by a person or legal entity for any crop year for 

23 peanuts under title I of the Food, Conservation, and En24 ergy Act of 2008 (7 U.S.C. 8701 et seq.) (or a successor 

25 provision) may not exceed $125,000, of which— 

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1 ‘‘(1) not more than $75,000 may consist of 

2 marketing loan gains and loan deficiency payments 

3 under subtitle B or C of title I of the Food, Con4 servation, and Energy Act of 2008 (7 U.S.C. 8731 

5 et seq.) (or a successor provision); and 

6 ‘‘(2) not more than $50,000 may consist of any 

7 other payments made for peanuts under title I of the 

8 Food, Conservation, and Energy Act of 2008 (7 

9 U.S.C. 8702 et seq.) (or a successor provision). 

10 ‘‘(d) SPOUSAL EQUITY.— 

11 ‘‘(1) IN GENERAL.—Notwithstanding sub12 sections (b) and (c), except as provided in paragraph 

13 (2), if a person and the spouse of the person are 

14 covered by paragraph (2) and receive, directly or in15 directly, any payment or gain covered by this sec16 tion, the total amount of payments or gains (as ap17 plicable) covered by this section that the person and 

18 spouse may jointly receive during any crop year may 

19 not exceed an amount equal to twice the applicable 

20 dollar amounts specified in subsections (b) and (c). 

21 ‘‘(2) EXCEPTIONS.— 

22 ‘‘(A) SEPARATE FARMING OPERATIONS.— 

23 In the case of a married couple in which each 

24 spouse, before the marriage, was separately en25 gaged in an unrelated farming operation, each 

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1 spouse shall be treated as a separate person 

2 with respect to a farming operation brought 

3 into the marriage by a spouse, subject to the 

4 condition that the farming operation shall re5 main a separate farming operation, as deter6 mined by the Secretary. 

7 ‘‘(B) ELECTION TO RECEIVE SEPARATE

8 PAYMENTS.—A married couple may elect to re9 ceive payments separately in the name of each 

10 spouse if the total amount of payments and 

11 benefits described in subsections (b) and (c) 

12 that the married couple receives, directly or in13 directly, does not exceed an amount equal to 

14 twice the applicable dollar amounts specified in 

15 those subsections.’’; 

16 (3) in paragraph (3)(B) of subsection (f), by 

17 adding at the end the following: 

18 ‘‘(iii) IRREVOCABLE TRUSTS.—In pro19 mulgating regulations to define the term 

20 ‘legal entity’ as the term applies to irrev21 ocable trusts, the Secretary shall ensure 

22 that irrevocable trusts are legitimate enti23 ties that have not been created for the pur24 pose of avoiding a payment limitation.’’; 

25 and 

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1 (4) in subsection (h), in the second sentence, by 

2 striking ‘‘or other entity’’ and inserting ‘‘or legal en3 tity’’. 

4 SEC. 3. SUBSTANTIVE CHANGE; PAYMENTS LIMITED TO AC5 TIVE FARMERS. 

6 The Food Security Act of 1985 is amended by strik7 ing section 1001A (7 U.S.C. 1308–1) and inserting the 

8 following: 

9 ‘‘SEC. 1001A. SUBSTANTIVE CHANGE; PAYMENTS LIMITED 

10 TO ACTIVE FARMERS. 

11 ‘‘(a) SUBSTANTIVE CHANGE.— 

12 ‘‘(1) IN GENERAL.—For purposes of the appli13 cation of limitations under this section, the Sec14 retary shall not approve any change in a farming op15 eration that otherwise would increase the number of 

16 persons or legal entities to which the limitations 

17 under this section apply, unless the Secretary deter18 mines that the change is bona fide and substantive. 

19 ‘‘(2) SEPARATE EQUIPMENT AND LABOR.—For 

20 the purpose of paragraph (1), any division of a 

21 farming operation into 2 or more units under which 

22 the equipment and labor are not substantially sepa23 rate shall not be considered bona fide and sub24 stantive. 

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1 ‘‘(3) FAMILY MEMBERS.—For the purpose of 

2 paragraph (1), the addition of a family member to 

3 a farming operation under the criteria established 

4 under subsection (b)(3)(B) shall be considered to be 

5 a bona fide and substantive change in the farming 

6 operation. 

7 ‘‘(4) PRIMARY CONTROL.—To prevent a farm8 ing operation from reorganizing in a manner that is 

9 inconsistent with the purposes of this Act, the Sec10 retary shall promulgate such regulations as the Sec11 retary determines to be necessary to simultaneously 

12 attribute payments for a farming operation to more 

13 than 1 person or legal entity, including the person 

14 or legal entity that exercises primary control over 

15 the farming operation, including to respond to— 

16 ‘‘(A)(i) any instance in which ownership of 

17 a farming operation is transferred to a person 

18 or legal entity under an arrangement that pro19 vides for the sale or exchange of any asset or 

20 ownership interest in 1 or more legal entities at 

21 less than fair market value; and 

22 ‘‘(ii) the transferor is provided preferential 

23 rights to repurchase the asset or interest at less 

24 than fair market value; or 

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1 ‘‘(B) a sale or exchange of any asset or 

2 ownership interest in 1 or more legal entities 

3 under an arrangement under which rights to 

4 exercise control over the asset or interest are 

5 retained, directly or indirectly, by the trans6 feror. 

7 ‘‘(b) PAYMENTS LIMITED TO ACTIVE FARMERS.— 

8 ‘‘(1) IN GENERAL.—To be eligible to receive, di9 rectly or indirectly, payments or benefits described 

10 as being subject to limitation in subsection (b) or (c) 

11 of section 1001 with respect to a particular farming 

12 operation, a person or legal entity shall be actively 

13 engaged in farming with respect to the farming op14 eration, in accordance with paragraphs (2), (3), and 

15 (4). 

16 ‘‘(2) GENERAL CLASSES ACTIVELY ENGAGED IN

17 FARMING.— 

18 ‘‘(A) DEFINITION OF ACTIVE PERSONAL

19 MANAGEMENT.—In this paragraph, the term 

20 ‘active personal management’ means, with re21 spect to a person, management duties carried 

22 out by the person for a farming operation that 

23 are personally provided by the person on a reg24 ular, continuous, and substantial basis, includ25 ing the supervision and direction of— 

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1 ‘‘(i) activities and labor involved in 

2 the farming operation; and 

3 ‘‘(ii) onsite services directly related 

4 and necessary to the farming operation. 

5 ‘‘(B) ACTIVE ENGAGEMENT.—Except as 

6 provided in paragraph (3), for purposes of 

7 paragraph (1), the following shall apply: 

8 ‘‘(i) A person shall be considered to be 

9 actively engaged in farming with respect to 

10 a farming operation if— 

11 ‘‘(I) the person makes a signifi12 cant contribution, as determined 

13 under subparagraph (E) (based on the 

14 total value of the farming operation), 

15 to the farming operation of— 

16 ‘‘(aa) capital, equipment, or 

17 land; and 

18 ‘‘(bb) personal labor or ac19 tive personal management; 

20 ‘‘(II) the share of the profits or 

21 losses of the person from the farming 

22 operation is commensurate with the 

23 contributions of the person to the op24 eration; and 

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1 ‘‘(III) a contribution of the per2 son is at risk. 

3 ‘‘(ii) A legal entity shall be considered 

4 to be actively engaged in farming with re5 spect to a farming operation if— 

6 ‘‘(I) the legal entity makes a sig7 nificant contribution, as determined 

8 under subparagraph (E) (based on the 

9 total value of the farming operation), 

10 to the farming operation of capital, 

11 equipment, or land; 

12 ‘‘(II)(aa) the stockholders or 

13 members that collectively own at least 

14 51 percent of the combined beneficial 

15 interest in the legal entity each make 

16 a significant contribution of personal 

17 labor or active personal management 

18 to the operation; or 

19 ‘‘(bb) in the case of a legal entity 

20 in which all of the beneficial interests 

21 are held by family members, any 

22 stockholder or member (or household 

23 comprised of a stockholder or member 

24 and the spouse of the stockholder or 

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1 cent of the beneficial interest in the 

2 legal entity makes a significant con3 tribution of personal labor or active 

4 personal management; and 

5 ‘‘(III) the legal entity meets the 

6 requirements of subclauses (II) and 

7 (III) of clause (i). 

8 ‘‘(C) CERTAIN ENTITIES MAKING SIGNIFI9 CANT CONTRIBUTIONS.—If a general partner10 ship, joint venture, or similar entity (as deter11 mined by the Secretary) separately makes a sig12 nificant contribution (based on the total value 

13 of the farming operation involved) of capital, 

14 equipment, or land, the partners or members 

15 making a significant contribution of personal 

16 labor or active personal management and meet17 ing the standards provided in subclauses (II) 

18 and (III) of subparagraph (B)(i) shall be con19 sidered to be actively engaged in farming with 

20 respect to the farming operation involved. 

21 ‘‘(D) EQUIPMENT AND PERSONAL

22 LABOR.—In making determinations under this 

23 subsection regarding equipment and personal 

24 labor, the Secretary shall take into consider25 ation the equipment and personal labor normstockstill on DSK4VPTVN1PROD with BILLS

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1 mally and customarily provided by farm opera2 tors in the area involved to produce program 

3 crops. 

4 ‘‘(E) SIGNIFICANT CONTRIBUTION OF PER5 SONAL LABOR OR ACTIVE PERSONAL MANAGE6 MENT.— 

7 ‘‘(i) IN GENERAL.—Subject to clause 

8 (ii), for purposes of subparagraph (B), a 

9 person shall be considered to be providing, 

10 on behalf of the person or a legal entity, 

11 a significant contribution of personal labor 

12 or active personal management, if the total 

13 contribution of personal labor and active 

14 personal management is at least equal to 

15 the lesser of— 

16 ‘‘(I) 1,000 hours; or 

17 ‘‘(II) a period of time equal to— 

18 ‘‘(aa) 50 percent of the com19 mensurate share of the total 

20 number of hours of personal 

21 labor or active personal manage22 ment required to conduct the 

23 farming operation; or 

24 ‘‘(bb) in the case of a stock25 holder or member (or household 

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1 comprised of a stockholder or 

2 member and the spouse of the 

3 stockholder or member) that 

4 owns at least 10 percent of the 

5 beneficial interest in a legal enti6 ty in which all of the beneficial 

7 interests are held by family mem8 bers who do not collectively re9 ceive payments directly or indi10 rectly, including payments re11 ceived by spouses, of more than 

12 twice the applicable limit, 50 per13 cent of the commensurate share 

14 of hours of the personal labor or 

15 active personal management of 

16 all family members required to 

17 conduct the farming operation. 

18 ‘‘(ii) MINIMUM LABOR HOURS.—For 

19 the purpose of clause (i), the minimum 

20 number of labor hours required to produce 

21 a commodity shall be equal to the number 

22 of hours that would be necessary to con23 duct a farming operation for the produc24 tion of each commodity that is comparable 

25 in size to the commensurate share of a 

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1 person or legal entity in the farming oper2 ation for the production of the commodity, 

3 based on the minimum number of hours 

4 per acre required to produce the com5 modity in the State in which the farming 

6 operation is located, as determined by the 

7 Secretary. 

8 ‘‘(3) SPECIAL CLASSES ACTIVELY ENGAGED IN

9 FARMING.—Notwithstanding paragraph (2), the fol10 lowing persons shall be considered to be actively en11 gaged in farming with respect to a farm operation: 

12 ‘‘(A) LANDOWNERS.—A person or legal en13 tity that is a landowner contributing owned 

14 land, and that meets the requirements of sub15 clauses (II) and (III) of paragraph (2)(B)(i), if, 

16 as determined by the Secretary— 

17 ‘‘(i) the landowner share-rents the 

18 land at a rate that is usual and customary; 

19 and 

20 ‘‘(ii) the share received by the land21 owner is commensurate with the share of 

22 the crop or income received as rent. 

23 ‘‘(B) FAMILY MEMBERS.—With respect to 

24 a farming operation conducted by persons who 

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1 ity of the stockholders or members of which are 

2 family members, an adult family member who 

3 makes a significant contribution (based on the 

4 total value of the farming operation) of active 

5 personal management or personal labor and, 

6 with respect to such contribution, who meets 

7 the requirements of subclauses (II) and (III) of 

8 paragraph (2)(B)(i). 

9 ‘‘(C) SHARECROPPERS.—A sharecropper 

10 who makes a significant contribution of per11 sonal labor to the farming operation and, with 

12 respect to such contribution, who meets the re13 quirements of subclauses (II) and (III) of para14 graph (2)(B)(i), and who was receiving pay15 ments from the landowner as a sharecropper 

16 prior to the effective date of the Food, Con17 servation, and Energy Act of 2008 (Public Law 

18 110–246; 122 Stat. 1651). 

19 ‘‘(D) FARM MANAGERS.—A person who 

20 otherwise meets the requirements of this sub21 section other than paragraph (2)(E) if— 

22 ‘‘(i) the individual— 

23 ‘‘(I)(aa) provides more than 50 

24 percent of the commensurate share of 

25 the total number of hours of active 

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1 personal management required to con2 duct the farming operation; and 

3 ‘‘(bb) is, with respect to the com4 mensurate share of the individual, the 

5 only party who is providing active per6 sonal management and who is at risk, 

7 other than a landlord, if any, de8 scribed in subparagraph (A); or 

9 ‘‘(II)(aa) is the only individual 

10 qualifying the farming operation (in11 cluding a sole proprietorship, legal en12 tity, general partnership, or joint ven13 ture) as actively engaged in farming; 

14 and 

15 ‘‘(bb) qualifies only a single sole 

16 proprietorship, legal entity, general 

17 partnership, or joint venture as ac18 tively engaged in farming; 

19 ‘‘(ii) the individual does not provide 

20 active personal management to meet the 

21 requirements of this subsection for persons 

22 or legal entities that collectively receive, di23 rectly or indirectly, an amount equal to 

24 more than the applicable limits under submstockstill on DSK4VPTVN1PROD with BILLS

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1 sections (b), (c), and (d) of section 1001; 

2 and 

3 ‘‘(iii) the individual manages a farm 

4 operation that is not jointly managed with 

5 persons or legal entities that collectively re6 ceive, directly or indirectly, an amount 

7 equal to more than the applicable limits 

8 under subsections (b), (c), and (d) of sec9 tion 1001. 

10 ‘‘(4) PERSONS AND LEGAL ENTITIES NOT AC11 TIVELY ENGAGED IN FARMING.—For the purposes of 

12 paragraph (1), except as provided in paragraph (3), 

13 the following persons and legal entities shall not be 

14 considered to be actively engaged in farming with re15 spect to a farm operation: 

16 ‘‘(A) LANDLORDS.—A landlord contrib17 uting land to the farming operation if the land18 lord receives cash rent, or a crop share guaran19 teed as to the amount of the commodity to be 

20 paid in rent, for such use of the land. 

21 ‘‘(B) OTHER PERSONS AND LEGAL ENTI22 TIES.—Any other person or legal entity, or 

23 class of persons or legal entities, that fails to 

24 meet the requirements of paragraphs (2) and 

25 (3), as determined by the Secretary. 

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1 ‘‘(5) PERSONAL LABOR OR ACTIVE PERSONAL

2 MANAGEMENT.—No stockholder or other member of 

3 a legal entity or person may provide personal labor 

4 or active personal management to meet the require5 ments of this subsection for persons or legal entities 

6 that collectively receive, directly or indirectly, an 

7 amount equal to— 

8 ‘‘(A) more than the applicable limits under 

9 subsections (b) and (c) of section 1001; or 

10 ‘‘(B) in the case of a stockholder or mem11 ber in conjunction with the spouse of the stock12 holder or member, more than the applicable 

13 limits described in subparagraph (A). 

14 ‘‘(6) CUSTOM FARMING SERVICES.—A person or 

15 legal entity receiving custom farming services will be 

16 considered separately eligible for payment limitation 

17 purposes if the person or legal entity is actively en18 gaged in farming based on paragraphs (1) through 

19 (3). 

20 ‘‘(7) GROWERS OF HYBRID SEED.—To deter21 mine whether a person or legal entity growing hy22 brid seed under contract shall be considered to be 

23 actively engaged in farming, the Secretary shall not 

24 take into consideration the existence of a hybrid seed 

25 contract. 

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1 ‘‘(c) NOTIFICATION BY LEGAL ENTITIES.—To facili2 tate the administration of this section, each legal entity 

3 that receives payments or benefits described as being sub4 ject to limitation in subsection (b) or (c) of section 1001 

5 with respect to a particular farming operation shall— 

6 ‘‘(1) notify each person or other legal entity 

7 that acquires or holds a beneficial interest in the 

8 farming operation of the requirements and limita9 tions under this section; and 

10 ‘‘(2) provide to the Secretary, at such times and 

11 in such manner as the Secretary may require, the 

12 name and social security number of each person, or 

13 the name and taxpayer identification number of each 

14 legal entity, that holds or acquires such a beneficial 

15 interest.’’. 

16 SEC. 4. FOREIGN PERSONS AND LEGAL ENTITIES MADE IN17 ELIGIBLE FOR PROGRAM BENEFITS. 

18 Section 1001C of the Food Security Act of 1985 (7 

19 U.S.C. 1308–3) is amended— 

20 (1) in the section heading, by striking ‘‘PER21 SONS’’ and inserting ‘‘PERSONS AND LEGAL EN22 TITIES’’; 

23 (2) in subsection (b)— 

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1 (A) in the subsection heading, by striking 

2 ‘‘CORPORATION OR OTHER’’ and inserting 

3 ‘‘LEGAL’’; 

4 (B) in the first sentence, by striking ‘‘a 

5 corporation or other entity shall be considered 

6 a person that’’ and inserting ‘‘a legal entity’’; 

7 and 

8 (C) in the second sentence, by striking ‘‘an 

9 entity’’ and inserting ‘‘a legal entity’’; and 

10 (3) in subsection (c), by striking ‘‘person’’ and 

11 inserting ‘‘legal entity or person’’. 

12 SEC. 5. BUDGETARY EFFECTS. 

13 The budgetary effects of this Act, for the purpose of 

14 complying with the Statutory Pay-As-You-Go Act of 2010, 

15 shall be determined by reference to the latest statement 

16 titled ‘‘Budgetary Effects of PAYGO Legislation’’ for this 

17 Act, submitted for printing in the Congressional Record 

18 by the Chairman of the Senate Budget Committee, pro19 vided that such statement has been submitted prior to the 

20 vote on passage. 

Æ 

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