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contains regulatory documents having general

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are keyed to and codified in the Code of

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Rules and Regulations Federal Register

887 

Vol. 75, No. 4 

Thursday, January 7, 2010 

DEPARTMENT OF AGRICULTURE 

Commodity Credit Corporation 

7 CFR 1400 

RIN 0560–AH85 

Payment Eligibility and Payment 

Limitation; Miscellaneous Technical 

Corrections 

AGENCY: Commodity Credit Corporation 

and Farm Service Agency, USDA. 

ACTION: Final rule. 

SUMMARY: The Commodity Credit 

Corporation (CCC) is amending the 

regulations that specify payment 

eligibility and payment limitation 

requirements for participants in CCCfunded programs. The amendments 

made in this rule address comments 

received on the interim rule and make 

minor technical corrections. This rule 

will apply to 2010 and subsequent crop, 

program, or fiscal year payments for 

participants in CCC-funded programs. 

DATES: Effective Date: This rule is 

effective January 7, 2010. 

FOR FURTHER INFORMATION CONTACT: 

James Baxa, Production, Emergencies 

and Compliance Division, FSA, USDA, 

telephone: (202) 720–3463. Persons with 

disabilities who require alternative 

means for communication (Braille, large 

print, audio tape, etc.) should contact 

the USDA Target Center at (202) 720– 

2600 (voice and TDD). 

SUPPLEMENTARY INFORMATION: 

Background 

CCC published an interim rule on 

December 29, 2008 (73 FR 79267– 

79284) implementing the payment 

eligibility and payment limitation 

provisions from the Food, Conservation, 

and Energy Act of 2008 (Pub. L. 110– 

246, the 2008 Farm Bill) that are 

applicable to most CCC and FSA 

commodity, price support, and 

conservation programs. The rule 

included specific payment limits for 

affected programs, provisions for how 

payments are attributed to individuals, 

average Adjusted Gross Income (AGI) 

limitation requirements for payment 

recipients, and other eligibility criteria 

that included actively engaged in 

farming requirements and provisions for 

minors. It included provisions that 

certain CCC farm program payments 

will be made only to persons and legal 

entities actively engaged in farming, as 

evidenced by contribution of land, 

capital, or equipment and labor or 

management to the farming operation. 

The majority of the provisions in the 

rule were requirements of the 2008 

Farm Bill for which USDA had little or 

no discretion. 

The comment period for the rule 

closed on January 28, 2009. CCC 

received comments requesting that the 

comment period be reopened. CCC 

reopened the comment period until 

April 6, 2009 (74 FR 6117). In response 

to the interim rule, CCC received 5,060 

comments, including comments from 

producers, commodity groups, 

cooperatives, producer associations, 

lenders, crop consultants, certified 

public accountants, attorneys, members 

of Congress (both House and Senate), 

State agricultural officials, crop 

insurance agents, dairy farmers, cotton 

processors, organic and sustainable crop 

producers, commodity brokers, the 

USDA Office of the Inspector General, 

USDA agencies and employees, 

teachers, animal scientists, farm 

implement dealers, taxpayers, and a 

restaurant chef. The majority of 

comments raised questions or concerns 

about specific parts of the rule. The rest 

of the comments either supported parts 

of the rule or raised general policy 

issues about farm programs. Seventythree percent of the comments stated 

that the payment eligibility rules need 

to be made more restrictive, particularly 

in the area of the requirements of active 

personal management; two percent 

asked for an exception for smaller 

farming operations. 

This rule specifies that for most types 

of legal entities, the requirement that all 

partners, stockholders, or members must 

provide active labor or management 

does not apply if: (1) Interest holders 

who collectively hold at least 50 percent 

interest in the legal entity are providing 

personal labor or active personal 

management; and (2) they all are 

receiving, directly or indirectly, total 

payments less than one payment 

limitation. This was added to address 

the comments that the restrictions 

intended to end abusive practices by 

passive investors should not negatively 

impact smaller family farming 

operations where older members may 

not be active contributors. It is a change 

from the interim rule that required all 

partners, stockholders, and members in 

a legal entity to provide active personal 

labor or management for the legal entity 

to be eligible for 100 percent of the 

payment otherwise due the legal entity. 

Also, in response to comments, this 

rule makes minor clarifications to 

ensure that the rule is clear and 

consistent with our handbook and with 

our current practice. This rule clarifies 

that ‘‘actively engaged in farming’’ 

provisions do not apply to Conservation 

Reserve Program contracts and 

extensions to such contracts made 

effective on or after October 1, 2008. It 

clarifies that determinations for joint 

operations with six or more members 

will be made by the FSA State office. It 

clarifies that certain ‘‘actively engaged in 

farming’’ requirements for a person can 

be met if the spouse of that person 

meets the requirements. It clarifies that 

for a change to a farming operation to 

be considered bona fide, one rather than 

all of the items in the list of bona fide 

changes must be met. It changes the 

April 1 date in the minor child 

provisions to the same June 1 date used 

for attribution of payments. This is for 

consistency since the manner in which 

payments will be attributed for payment 

limitation purposes depends in part on 

whether or not a participant is a minor. 

It clarifies the provisions for trusts and 

estates to make them consistent with the 

other sections regarding requirements 

for contributions. These changes to the 

rule are expected to have no substantive 

impact. 

This rule also implements minor 

technical corrections, such as correcting 

internal paragraph references and 

inconsistent terminology, which are 

expected to have no substantive impact. 

Some of these changes were made in 

response to comments received; others 

were the result of our own review of the 

regulation for clarity and consistency. 

This rule amends 7 CFR part 1400 to 

implement these changes. 


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888 Federal Register / Vol. 75, No. 4 / Thursday, January 7, 2010 / Rules and Regulations 

Discussion of Comments 

The following provides a summary of 

the comments received that were related 

to each specific subpart or section and 

the agency’s response, including 

changes we are making to the 

regulations. 

Subpart A—General Provisions 

The following discussion addresses 

the comments received on Subpart A 

identified by section. 

Sec. 1400.1 Applicability 

Comment: Wealthy farmers do not 

need payments. Put a cap of $25,000 for 

total payments. 

Response: The limitations on 

payments per person or legal entity for 

the applicable period for the various 

CCC and FSA programs are specified in 

the 2008 Farm Bill. Therefore, we did 

not make any changes to the rule in 

response to the comment suggesting a 

$25,000 cap. 

Regarding payments to wealthy 

farmers, as provided in the 2008 Farm 

Bill and in § 1400.500 of the regulations, 

persons and legal entities who exceed 

certain average AGI limits are not 

eligible for any payments or benefits for 

the programs specified in this section; 

and the average AGI limits in the 

current regulations are lower than under 

the Farm Security and Rural Investment 

Act of 2002 (Pub. L. 107–171, 

commonly known as the 2002 Farm 

Bill). Therefore, we did not make any 

changes to the rule in response to the 

comment. 

Comment: The elimination of a 

limitation for the Marketing Assistance 

Loans (MAL) and Loan Deficiency 

Payments (LDP) payments is consistent 

with the statute, but opens a potential 

loophole. 

Response: A limitation is applied to a 

Marketing Loan Gain (MLG) and LDP, 

not MAL. In any case, as noted in the 

comment, the elimination of the cap on 

payments per person or legal entity for 

the applicable period for MLGs and 

LDPs is specified in the 2008 Farm Bill. 

Although there is now no limitation on 

MLGs and LDPs, persons receiving 

MLGs and LDPs are subject to other 

requirements in this part, including 

average AGI limitation provisions, so 

there are practical limits to how much 

a person or legal entity can qualify for 

while still having to meet the other 

requirements, particularly average AGI 

provisions. The regulations comply with 

the requirements in the 2008 Farm Bill; 

therefore, we did not make any changes 

to the rule in response to the comment. 

Comment: How will this apply to the 

Conservation Reserve Program (CRP)? 

Will FSA release these contracts if over 

half the ownership fails to qualify (due 

to AGI or actively engaged)? If so, what 

incentive is there to follow the 

conservation practices? The provisions 

in both §§ 1400.1 and 1400.201 appear 

to require that a person be actively 

engaged in farming to be eligible to 

receive conservation benefits, which 

was not in the 2008 Farm Bill and 

therefore should not be in the rule. 

Response: We will make a technical 

correction to this section to clarify that 

‘‘actively engaged in farming’’ provisions 

in the current regulations do not apply 

to CRP contracts and extensions to such 

contracts beginning October 1, 2008. 

CRP contracts are subject to the 

regulations in place at the time the 

contract was executed, so the payment 

limitation, ‘‘actively engaged in 

farming,’’ and average AGI limits in the 

current regulation do not apply to 

contracts executed prior to October 1, 

2008. For contracts executed before that 

date, the regulations in the January 1, 

2008 edition of the Code of Federal 

Regulations apply. 

The average AGI limitations in effect 

when the contract was signed apply to 

CRP, but those limitations apply only 

when the initial contract is made; if the 

person or legal entity’s average AGI 

exceeds the limit in later years, they are 

still eligible for annual rental payments 

for the duration of that contract. 

Comment: The table that identifies 

payment limits identifies the Wetland 

Reserve Program (WRP) limit of 

$50,000. That is correct, but it needs a 

footnote that the payment limit does not 

apply to payments for perpetual or 30 

year easements or under 30 year 

contracts. 

Response: We added that footnote in 

this rule. 

Sec. 1400.2 Administration 

Comment: The interim rule should 

state specifically who will determine 

payment limitations and payment 

eligibility for a joint operation with six 

or more members. 

Response: The determination will be 

made by the FSA State office, as it has 

been made in the past. We clarified that 

in this rule. 

Comment: If people need to provide 

additional paperwork to FSA, allow 

them to withdraw their application for 

payment and resubmit; ‘‘stop’’ the 60 

day determination clock as specified in 

§ 1400.2(f). This has been done 

sometimes in the past, but it would be 

appropriate to specify it in the rule. 

Response: This is and will continue to 

be our practice, and is specified in our 

handbook. Applicants have the option 

to withdraw or change their farm 

operating plan at any time. The 60 day 

determination provision in the rule 

requires the FSA county office to make 

a timely determination; it does not 

require the producer to submit 

documentation within 60 days. If an 

unfavorable determination is made, 

based on the documentation provided, a 

revised farm operating plan can be 

provided to the county office. No 

changes were made to the rule in 

response to this comment. 

Sec. 1400.3 Definitions 

Some commenters support the 

changes to the definition of capital, and 

the provisions that require funding 

provided to a farming operation to be 

independent and separate from funding 

provided to all other farming operations, 

and requiring that a person or entity’s 

contribution of capital be independent 

from others. They also support the 

clarification that advance program 

payments are not considered capital 

contributions, all the changes and 

recommend they stay in the final rule, 

and the definitions of contribution and 

joint operation. 

Comment: The definition of ‘‘capital’’ 

is fine, but it is not used consistently in 

§§ 1400.202, 1400.203, and 1400.204, 

which appear to disqualify any land, 

equipment, or capital acquired with a 

loan. 

Response: The use of the term 

‘‘capital’’ in sections §§ 1400.202, 

1400.203, and 1400.204 is consistent 

with the way it is defined, including the 

provision that capital can include 

borrowed (loaned) funding. Sections 

1400.202, 1400.203, and 1400.204 do 

further clarify appropriate loan terms, 

including guarantees and co-signers, for 

loans used for eligible ‘‘actively 

engaged’’ contributions of capital, land, 

and equipment. Those sections do not 

automatically disqualify all land, 

equipment, or capital acquired with a 

loan. No changes were made to the rule 

based on this comment. 

Comment: The rule is not consistent 

on using the term ‘‘joint operation’’ as 

defined. Sections 1400.6(a) and 

1400.106(b), for example, use slightly 

different terms. Change the references to 

general partnerships or joint ventures in 

those sections to ‘‘joint operation.’’ 

Response: We agree that the term 

‘‘joint operation’’ should be used 

consistently. We will change §§ 1400.6 

and 1400.106 to use the term ‘‘joint 

operation.’’ 

Comment: Change the definition of 

‘‘family member’’ to include nieces and 

nephews. The definition will not allow 

some family members to be eligible, for 

example, a farmer will not be eligible for 

a direct payment if the farming partner 


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Federal Register / Vol. 75, No. 4 / Thursday, January 7, 2010 / Rules and Regulations 889 

is the spouse’s uncle; the farmer is not 

a direct descendent. 

Response: The definition of family 

member in the rule is the definition that 

is required by the 2008 Farm Bill. The 

definition in the 2008 Farm Bill was 

clear and complete as written. 

Therefore, we did not make any changes 

to the rule in response to the comment. 

Comments: A more rigorous 

definition of active personal 

management is needed; too many 

people per legal entity are qualifying for 

payment eligibility based on only active 

personal management. Change the 

definition of ‘‘active personal 

management’’ to be a measurable, 

quantifiable standard. That term as it is 

further used in the definitions of 

‘‘contribution’’ and ‘‘significant 

contribution’’ represents a potential 

loophole. Set a specific monetary or 

time requirement; ideally, 1000 hours or 

50 percent of the total hours necessary 

to conduct a farming operation of 

comparable size. 

Add the words, ‘‘on a regular, 

substantial, and continuing basis’’ to the 

definition of ‘‘active personal 

management,’’ including ‘‘day to day’’ 

supervision and ‘‘services including but 

not limited to significant on-site 

services.’’ 

Response: The definition of what 

constitutes a significant contribution is 

provided by regulation, not by statute 

and could be changed. We recognize the 

difficulty in determining the 

significance of a management 

contribution under the current 

definition and the desirability of a 

measurable, quantifiable standard. 

However, unlike labor, the significance 

of a management contribution is not 

appropriately measured by the amount 

of time a person spends doing the 

claimed contribution. The current 

regulatory definition of a significant 

contribution of active personal 

management has been in effect for over 

20 years; Congress has not mandated a 

more restrictive definition during that 

time, including in the 2008 Farm Bill. 

However, we are currently exploring 

whether the current definition could be 

amended in a manner that would be 

fair, equitable, and enhance program 

integrity. At this time, no changes were 

made as the result of this comment and 

other related comments. 

Comment: Do not allow a combined 

contribution of labor and management 

to be counted as a ‘‘significant 

contribution’’ in the definition. Define 

both with a quantifiable standard. 

Response: A strict division of 

responsibilities between labor and 

management is not a realistic 

expectation for many smaller farming 

operations, where actively engaged 

members of the operation typically do a 

combination of both. A significant 

contribution by an actively engaged 

farmer often does include a combination 

of labor and management. No changes 

were made as a result of this comment. 

Comment: ‘‘Commensurate’’ is used 

throughout, but never defined. Since it 

is crucial to payment eligibility, need to 

define it. 

Response: ‘‘Commensurate’’ is not 

defined in this rule, because it is 

utilized based upon its common 

dictionary definition and is not used in 

a special way in the rule. When making 

a determination regarding 

commensurate contributions, we have 

not required and will not require that 

the contribution be exactly proportional 

to the ownership share. No changes 

were made to the rule as a result of this 

comment. 

Sec. 1400.5 Denial of Program 

Benefits 

Comment: It is unfair to consider 

fallow land or land with no production 

as an example of a scheme or device. 

Sometimes producers make mistakes 

providing information. The current test 

for scheme or device in the regulation 

is too difficult to meet and is arbitrary 

and capricious. 

Response: Land where no crops are 

grown or commodities produced is 

provided as a factor in an example of a 

scheme or device in the rule. Also, it is 

listed as one indicator of a possible 

scheme or device; it has not and will not 

be used as the only proof that a scheme 

or device has occurred. The term 

‘‘fallow’’ land did not appear in the 

previous rule or the preamble. 

The requirement to deny program 

benefits to persons who have 

participated in a scheme or device is in 

the 2008 Farm Bill, and the statute also 

gives the Secretary discretionary 

authority to decide what other serious 

actions merit denial of benefits. The 

expanded provisions on denial of 

benefits are consistent with the general 

policy of the 2008 Farm Bill to tighten 

payment limits and payment eligibility. 

We agree with Congress that it is 

important to prevent taxpayer money 

being used to reward fraud, and 

particularly to prevent schemes such as 

‘‘creating a business arrangement using 

rental agreements and other 

arrangements to conceal the interest of 

a person or legal entity in a farm or 

farming operation for the purpose of 

obtaining program payments the person 

or legal entity would otherwise not be 

eligible to receive.’’ Therefore, we did 

not make any change to the rule in 

response to this comment. 

Comment: The section on submitting 

false information should include the 

words ‘‘knowingly’’ and ‘‘intentionally,’’ 

to make it clear that accidentally 

submitting wrong information will not 

be considered fraud. 

Response: The rule does refer to 

‘‘knowingly’’ engaging in the creation of 

a fraudulent document. By dictionary 

definition, fraudulent means 

intentionally false. Therefore, we did 

not make any changes to the rule in 

response to the comment. 

Sec. 1400.7 Commensurate 

Contributions and Risk 

Comment: Changing ‘‘at risk’’ to ‘‘at 

risk for a loss’’ is not supported by 

statute; it is unclear how a person’s risk 

could be measured to determine 

whether it is commensurate to the 

claimed share of profits and losses. All 

members of a partnership are 100 

percent liable for a loss. One partner 

may have substantially greater personal 

assets at risk outside the partnership 

than another partner. 

Response: This change was intended 

only to clarify that persons who share 

no risk in the crop are not eligible for 

payment; no one should be made 

eligible or ineligible by this wording 

change. Also, the dictionary definition 

of risk includes exposure to the chance 

of loss. Therefore, we did not make any 

changes to the rule in response to the 

comment. 

Subpart B—Payment Limitation 

The following discussion addresses 

the comments received on Subpart B 

identified by section. 

Sec. 1400.100 Revocable Trust 

Comments: What about revocable 

living trusts? The IRS does not 

recognize this as an entity with 

independent tax status, but USDA does, 

so a person can not qualify as actively 

engaged because land is leased through 

the trust, and a family member is the 

trustee. 

This rule can be read to require a 

living trust to be treated as an entity 

subject to its own payment limitation. 

There should be an exception for living 

trusts created by a husband and wife, 

where they are the sole beneficiaries, 

the trust uses one of their social security 

numbers, and the trust income is 

reported on their individual returns. It 

looks like this rule requires that with a 

trust, two people who would normally 

qualify for two payments would be 

eligible for only one payment, or be 

forced to apply as cash rent tenants on 

their own land. 


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890 Federal Register / Vol. 75, No. 4 / Thursday, January 7, 2010 / Rules and Regulations 

Response: The 2008 Farm Bill clearly 

specifies that ‘‘a revocable trust shall be 

considered to be the same person as the 

grantor of the trust,’’ which is reflected 

in the rule. The tax status of such trust 

is irrelevant for the purposes of payment 

eligibility. We cannot attribute two 

payment limitations to one Social 

Security number. Therefore, we did not 

make any changes to the rule in 

response to the comment. 

Sec. 1400.101 Minor Children 

Comment: The provision attributing 

payments received by a minor to the 

parent who receives the greater amount 

of farm payments exceeds the authority. 

The payments must be attributed 

equally to the parents, not to the one 

receiving the greater payments. 

Response: The 2008 Farm Bill 

requires that payments received by a 

child under the age of 18 be attributed 

to the parents of the child. It also 

authorizes the Secretary to ‘‘issue 

regulations specifying the conditions 

under which the payments received by 

a child under the age of 18 will not be 

attributed to the parents of the child.’’ 

The 2008 Farm Bill does not require that 

the payments be attributed equally, and 

it gives the authority to set exceptions, 

so the regulation is within the authority. 

This provision prevents actions to evade 

the payment limitation provisions 

through manipulation of the attribution 

of payments received by minor children. 

Therefore, we did not make any changes 

to the rule in response to the comment. 

Sec. 1400.102 States, Political 

Subdivisions, and Agencies Thereof 

Some commenters support the 

requirement that payments to States be 

used to support public schools. 

Comment: The 2008 Farm Bill 

allowed an exception to the payment 

limits for States with a population of 

less than 1,500,000. The rule should 

specify that. 

Response: We will add a provision to 

the rule specifying that the population 

will be determined using the most 

recent U.S. Census Bureau data, and 

specifying the 1,500,000 threshold. 

Using 2008 data, the list of States that 

meet the criteria are: Alaska, Delaware, 

Hawaii, Maine, Montana, North Dakota, 

New Hampshire, Rhode Island, South 

Dakota, Vermont, and Wyoming. 

Comment: States with populations 

greater than 1,500,000 should still be 

eligible for full benefits. 

Response: The 2008 Farm Bill states 

that States may receive direct, countercyclical, or Average Crop Revenue 

Election (ACRE) payments not to exceed 

$500,000, and that the payments may 

only be used to maintain a public 

school; there is an exception for States 

with a population less than 1,500,000. 

We do not have the authority to expand 

that exception to all States. Therefore, 

we did not make any changes to the rule 

in response to the comment. 

Comment: State lands should still be 

eligible for CRP. 

Response: CRP contracts are 

administered under the regulations in 

place when the contract was 

established. Any State lands already 

under a CRP contract approved prior to 

October 1, 2008 will remain subject to 

the rules in 7 CFR part 1400 in effect 

when the contract was approved. 

However, new contracts will be 

established under the current rules, and 

State lands will not be eligible for new 

CRP enrollments or extensions. We did 

not make any changes to the rule in 

response to the comment. 

Sec. 1400.104 Changes in Farming 

Operations 

Comment: For a farming operation of 

economically viable size, the 

requirement to add twenty percent base 

acres in order to qualify another family 

member will require adding hundreds of 

acres to the farm. This is an 

unreasonable hardship. 

Response: As stated in the preamble 

to the previous publication of the 

payment eligibility and limitation rule, 

additional persons or legal entities 

beyond one for payment limitation 

purposes may be recognized if an FSA 

State office specialist determines that 

the increase in base acres was of a 

magnitude that would support further 

additions to the farming operation of 

persons or legal entities for payment 

limitation purposes. Also, the 

‘‘substantive change’’ provisions were 

announced well in advance of the 2009 

crop year, so that operations would have 

time to adjust. As specified, the addition 

of a family member to a farming 

operation will be considered a bona fide 

and substantive change if they also meet 

the ‘‘actively engaged in farming’’ 

requirements of § 1400.208. One, not all, 

of the bona fide changes listed in the 

rule must occur for the change to be 

considered bona fide; we changed the 

rule to make it clearer that the list of 

changes considered bona fide is an ‘‘or’’ 

list, not an ‘‘and’’ list. 

Comment: Is ‘‘amount’’ of equipment 

or land transferred a dollar value or the 

number of pieces of equipment or acres 

of land? Specify which it is in the rule. 

Response: The regulation also refers 

to fair market value, so the regulation is 

already clear that dollar value is meant. 

Therefore, we did not make any changes 

to the rule in response to the comment. 

Comments: Several comments address 

the issue of substantive change, and 

seller financing, when the buyer or new 

partner is a non-family member. 

Prohibiting seller financing of land or 

equipment is unduly burdensome. The 

use of seller financing is a key 

component of succession planning and 

is critical in attracting young and 

beginning farmers. In many cases, this 

provision will eliminate the ability of 

beginning farmers an opportunity to 

enter farming. 

For example, if a 67-year-old farmer 

tries to get a new farmer started to take 

over the farm, the new farmer is likely 

to be young and have little capital. If 

they start as partners, this will be a 

problem under the substantive change 

rule. If the farmer is only getting onethird of the maximum payment, why is 

there a problem adding a new person? 

The rules should be waived for persons 

who are not near the payment limit. 

Another example is a farmer planning 

to retire who wants to add a niece’s 

husband to the farm. He is not a direct 

descendent. Why must the farmer lose 

half the farm payment, which is only a 

third of the maximum payment anyhow, 

for helping a new farmer? 

This prevents a farmer from buying 

out his neighbor if there is any kind of 

seller financing. This is unduly 

restrictive. 

Response: The previous rule did not 

change the provisions about seller 

financing when the buyer or new 

partner is a non-family member; the 

provisions have been substantially 

similar for the past twenty years. FSA is 

not prohibiting seller financing; it is 

merely setting the regulations for the 

changes to the farming operation that 

will justify payment eligibility for 

another person or legal entity. We did 

not make any changes to the rule in 

response to the comments. 

Comment: Add a clause in 

§ 1400.104(a)(3)(ii) that the FSA State 

office makes the substantive 

determination that the change supports 

additional persons or entities to the 

farming operation ‘‘based solely on the 

expectation to benefit from the 

commercial success of the farming 

operation.’’ In other words, the change 

should be obviously to increase the 

profits of the farming operation, not just 

to maximize government payments. 

Response: The purpose of § 1400.104 

is to specify that substantive changes to 

the farming operation must in fact be 

bona fide and substantive to change the 

payment eligibility for the operation. 

The 2008 Farm Bill requires these 

provisions. It does not specify that the 

change must also be financially prudent; 

that change would exceed our 


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discretionary authority. The payment 

limitations regulations are intended to 

limit farm program payments to persons 

and legal entities actively engaged in 

farming and with average AGI below 

certain thresholds, rather than to limit 

payments to financially prudent persons 

and legal entities. Therefore, we did not 

make any changes to the rule in 

response to the comment. 

Comment: We strongly support the 

changes in § 1400.104(a)(4) and (a)(5), 

which end some abusive sales and gifts 

practices formerly used to dodge the 

payment limits. To further strengthen 

these paragraphs, add that the former 

owner has ‘‘no direct or indirect 

control.’’ 

Response: We will make this change 

to the rule. 

Sec. 1400.105 Attribution of Payments 

Comment: Under IRS tax law, a C 

corporation is taxed as a separate entity, 

and tax liability does not extend to 

stockholders. How can USDA legally 

attribute payments to a corporation to 

the stockholders? C corporations are not 

‘‘pass through’’ entities. 

Response: The 2008 Farm Bill 

specifically requires that ‘‘attribution of 

payments made to legal entities be 

traced through four levels of ownership 

in legal entities.’’ The tax status of an 

entity is irrelevant for the purposes of 

attribution of payments. Therefore, we 

did not make any changes to the rule in 

response to the comment. 

Comment: Charitable organizations do 

not necessarily have members or 

owners. Add a new paragraph saying 

that if the charity does not have 

members or owners, the payment will 

be attributed as if it had one member, 

itself. 

Response: That is how payments to a 

charitable organization will be 

attributed under the current regulations. 

Therefore, we did not make any changes 

to the rule in response to this comment. 

Subpart C—Payment Eligibility 

The following discussion addresses 

the comments received on Subpart C by 

section. 

Sec. 1400.201 General Provisions for 

Determining Whether a Person or Legal 

Entity Is Actively Engaged in Farming 

Some commenters support the 

addition of ‘‘and separately,’’ and similar 

language, as well as the requirement 

that the risk be commensurate with the 

share of the operation. 

Comment: Remove the ‘‘actively 

engaged in farming’’ provisions. Farming 

operations members that have outside 

jobs cannot work on the farm, but the 

money from FSA programs helps hire 

farm hands and buy new equipment, 

helping the local economy. 

Response: The 2008 Farm Bill 

requires that actively engaged in 

farming is an eligibility requirement for 

certain payments. Therefore, we did not 

make any changes to the rule in 

response to the comment. 

Comment: The requirements in 

§§ 1400.105 and 1400.204 requiring 

separate, distinct, identifiable, and 

documentable contributions, and 

similar provisions, are not realistic 

given the ways farms really operate and 

discriminate against spouses. Decisions 

and workloads are typically shared by 

family members on a family farm, and 

it is hard to separate one person’s 

contribution. The ‘‘independently and 

separately,’’ ‘‘separate and distinct,’’ etc. 

requirements for contributions in this 

section are confusing, possibly 

redundant, and likely to be 

inconsistently applied at the local level. 

Also, it appears to be more restrictive 

than was required by the 2008 Farm 

Bill. 

Response: The 2008 Farm Bill 

requires us to determine whether 

someone is actively engaged in farming 

based on their contributions to the 

farming operation and their share of the 

profits or losses, ‘‘commensurate with 

the contributions of the person to the 

farming operation.’’ To determine 

whether a person’s contributions and 

share of the profits and losses are 

commensurate with their contributions, 

we need to know what their separate, 

distinct, identifiable, and documentable 

contributions are. In other words, we 

need to know what specific 

contributions they made in order to 

verify that they are actively engaged in 

farming, and the specific contributions 

must be documentable. With regards to 

spouses, as specified in § 1400.202, if 

one spouse is actively engaged in 

farming, the other is considered to have 

made a contribution of labor or 

management to that farming operation. 

The 2008 Farm Bill requires us to have 

actively engaged in farming as an 

eligibility requirement for certain 

payments. Therefore, we did not make 

any changes to the rule in response to 

the comment. 

Comment: Require a person to 

actually work on a farm to be an ‘‘active 

farmer.’’ Do not let insurance 

policyholders and corporate staff 

receive payments. A conference call is 

not farming. 

Response: The 2008 Farm Bill 

requires us to have actively engaged in 

farming as an eligibility requirement for 

certain payments. Personal labor 

contributed to a farming operation 

would, by its nature, require that the 

person actually work on the farm. 

However, in lieu of a significant 

contribution of personal labor, the 

statute also allows a significant 

contribution of active personal 

management. Management encompasses 

more than on-site supervision; therefore, 

it would be overly restrictive and not 

supported by statute to make the change 

suggested by the comment. However, we 

are currently exploring whether the 

current definition could be amended in 

a manner that would be fair, equitable, 

and enhance program integrity. 

Therefore, we did not make a change to 

the rule in response to this comment 

and other related comments. 

Comment: Except for the spouse 

provisions, the changes to the actively 

engaged provisions are not required by 

the 2008 Farm Bill. Withdraw them, or 

at least delay implementation. 

Implement the 2008 Farm Bill that 

reflects the intent of Congress, no more, 

no less. Congress could have directed 

USDA to change the definition of 

actively engaged, but they did not. They 

had every opportunity, but chose not to, 

so it is clear the congressional intent 

was not to change the actively engaged 

provisions. So, withdraw the entire 

actively engaged changes. 

Response: The provisions in this rule 

do not exceed our discretionary 

authority and are within the provisions 

set by the 2008 Farm Bill, which does 

in fact amend the provisions for what 

constitutes ‘‘actively engaged in 

farming.’’ We did comply with the 

requirements of the 2008 Farm Bill; as 

discussed in further detail in a response 

to a comment on § 1400.204, we did 

provide an exception to the requirement 

that all stockholders or members in a 

legal entity such as a corporation must 

contribute personal labor or active 

personal management. 

Comment: Payments should only go 

to people who are resident farmer 

operators; people who perform on a 

regular basis the day-to-day work of that 

farm unit, or someone who previously 

farmed that unit and is now renting it 

out on a crop share basis. Off-farm 

owners should not be eligible, even if 

they provide off-site management or 

supervision. 

Response: The suggested change is 

beyond our statutory authority. As 

indicated previously, we are exploring 

whether the current definition of a 

significant contribution of active 

personal management could be 

amended in a manner that would be 

fair, equitable, and enhance program 

integrity. Therefore, we did not make a 


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892 Federal Register / Vol. 75, No. 4 / Thursday, January 7, 2010 / Rules and Regulations 

change to the rule in response to this 

comment and other related comments. 

Comment: If one spouse is actively 

engaged, the other should automatically 

qualify, whether the land is owned or 

rented. 

Response: Section 1400.202 specifies 

that if one spouse, or an estate of a 

deceased spouse, is determined to be 

actively engaged in farming, the other 

spouse is considered to have made a 

significant contribution of active 

personal labor or management, only to 

the same farming operation. This is not 

to say that the spouse will automatically 

meet the other requirements of being 

actively engaged in farming; 

contributions of land, capital, or 

equipment are generally also required to 

qualify as actively engaged in farming. 

There is no difference if the land is 

owned or rented with respect to spousal 

eligibility. The 2008 Farm Bill requires 

us to have actively engaged in farming 

as an eligibility requirement. Therefore, 

we did not make any changes to the rule 

in response to the comment. 

Sec. 1400.202 Persons 

Some commenters strongly support 

the ‘‘independently and separately’’ 

language. 

Comments: Under the old ‘‘3 entity’’ 

rule, many farms set up complex 

corporate structures to maintain 

eligibility. Now, they are being 

penalized and spouses will not be 

eligible. Delay the rule so that people 

have time to meet the new rules. For 

example, some farmers organized their 

family business around the 3 entity rule. 

More time is needed to adjust to the 

new rules. Also, a ‘‘farm wife’’ should be 

automatically considered to have made 

a separate and distinct contribution. 

Equal spousal qualification rules should 

apply regardless of the operation’s legal 

structure. 

The provision for spouses 

discriminates against spouses who 

operate as part of an entity or 

corporation. All spouses of actively 

engaged producers should be 

considered actively engaged. 

Response: Equal spousal qualification 

rules do apply regardless of the 

operation’s legal structure, as specified 

in further detail in our handbooks. We 

cannot delay implementation of the 

rule. We do not agree that the rule 

penalizes spouses in a farming 

operation. The previous rule included a 

provision by which if one spouse is 

determined to be actively engaged in 

farming, the other spouse is credited for 

the purposes of payment eligibility with 

making significant contributions of 

active personal labor or active personal 

management to the farming operation. 

While each spouse may now have their 

own respective limitation, each must 

also meet applicable program and 

payment eligibility requirements to 

receive program benefits. This is not to 

be construed as meaning if one spouse 

qualifies for payment, the other 

automatically qualifies as well. As 

previously mentioned, both spouses 

must make significant and requisite 

contributions to the farming operation 

that are commensurate with their 

claimed shares to be considered actively 

engaged in farming and eligible for 

program benefits. We did not make a 

change to the rule in response to this 

comment; we have further clarified in 

our handbooks that spouse qualification 

rules apply regardless of the operation’s 

legal structure. 

Comment: The provision for spouses 

discriminates against single people. 

Response: The provisions for spouses 

are as required by the 2008 Farm Bill. 

Therefore, we did not make any changes 

to the rule in response to the comment 

Comment: To preserve the long term 

viability of the soil, eligible persons 

should be owners of the property that 

they farm and for which they are 

receiving payments. 

Response: The 2008 Farm Bill does 

not restrict eligibility to landowners 

although specific provisions for 

landowners are provided. Therefore, we 

did not make any changes to the rule in 

response to the comment. 

Comment: If a spouse has arthritis and 

can not perform labor or management, 

does that impact eligibility under CRP? 

It appears that the rule discriminatory 

towards people with health issues. 

Response: Under the provisions of 

this rule, if one spouse is determined to 

be actively engaged in farming, the other 

spouse is credited for the purposes of 

payment eligibility with making 

significant contributions of personal 

labor or active personal management to 

the farming operation. In any case, 

actively engaged in farming provisions 

do not apply to CRP contracts approved 

on or after October 1, 2008. We did not 

make any changes to the rule in 

response to the comment. 

Comment: The exemption for minor 

children for actively engaged should 

also apply to retired parents. 

Response: There is no exemption for 

minor children for actively engaged in 

farming in 7 CFR part 1400. This rule 

changes § 1400.203 to clarify that at 

least 50 percent, rather than all, of the 

members, partners, or stockholders in 

an entity must make a contribution for 

the members, partners, or stockholders 

of the joint operation to be considered 

actively engaged. That provision may 

help retired parents in a family entity 

qualify for payment. 

Comment: The spouse provision 

should make it clear that the spouse’s 

active engagement will be considered to 

be ‘‘commensurate’’ with their interest. 

Also, it should apply in the context of 

the cash rent tenant rule. 

Response: It does apply, and we 

believe that it is clear. We have clarified 

this in our handbooks. 

Comment: If an adult child is trying 

to start a farm and is renting land from 

their parents, it is unreasonable that the 

parents cannot cosign or guarantee a 

loan in order for their adult child to 

obtain the operating money? If farmers 

change an operation’s structure FSA is 

now telling them that they are told they 

will be out of compliance with USDA’s 

Risk Management Agency. 

Why is a parent prohibited from cosigning a loan for an adult child that is 

renting land from them? 

Response: The rule does not prevent 

co-signing a loan; it only determines 

payment eligibility and payment 

limitations. A person who is renting 

land from someone who also co-signed 

a loan may not meet the requirements 

for ‘‘actively engaged in farming.’’ We 

did not change the rule in response to 

these comments. 

Comment: Why does FSA care about 

interest rates and repayment schedules? 

Why are you dictating the terms of 

financial agreements? 

Response: The 2008 Farm Bill 

requires us to determine whether 

someone is actively engaged in farming 

based on their contributions to the 

farming operation and their share of the 

profits or losses, ‘‘commensurate with 

the contributions of the person to the 

farming operation.’’ To determine that 

the contribution of land, capital, or 

equipment is in fact from that person, 

we need this information. If the 

contribution is funded with a loan, we 

need this information to ensure that 

there are not improperly favorable 

‘‘sweetheart’’ funding agreements 

between members of a farming 

operation set up for the purposes of 

evading payment eligibility provisions. 

We did not make any changes to the 

rule in response to this comment. 

Sec. 1400.203 Joint Operations 

Comments: A more rigorous 

definition or measurable standard for 

active personal management is needed; 

too many people per entity are 

qualifying for payment eligibility based 

on only active personal management. 

However, the comments did not 

represent a consensus on what that 

standard should be. Use a 1000 hour 

eligibility (test) for an active 


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contribution of management and labor 

combined. Require each actively 

engaged partner to work at least 1000 

hours in proving labor or management, 

or engage in labor or management for 

hours equal to at least half those 

required by the share of the operation. 

Define active management to include 

marketing, securing financing, 

supervising employees, and scheduling 

field activities. 

Close the potential loopholes and end 

unlimited payments to the nation’s 

largest farms. Require a person to either 

work half time on a farm or provide half 

the labor or management to qualify as an 

active farmer. The ‘‘actively engaged’’ 

issue is the biggest potential loophole of 

all. Megafarms with investor partners 

use this potential loophole to collect 

unlimited payments. 

The excess payments gained from the 

actively engaged potential loopholes 

allow megafarms to outbid smaller 

farmers and beginning farmers for land, 

leading to the demise of family farming. 

This potential loophole is strangling the 

economic future of rural communities 

and choking off farm entry for the next 

generation. 

Require a person to either work half 

to three quarters of their time on the 

farm, or provide half the labor or all the 

management on the share of the 

operation to qualify as an active farmer. 

To qualify for eligibility based on 

active personal management and no 

labor, the rule should require that 

person to personally provide at least 75 

percent of the total management 

required to run the farm or 90 percent 

of the total management that would be 

necessary to conduct a farming 

operation commensurate in size with 

their requisite share of the operation. 

To clarify separate and distinct 

contributions of active personal 

management, add language in 

§ 1400.203(a)(1) specifying that merely 

participating in meetings and voting is 

not sufficient. Add similar language in 

§ 1400.204(a)(1). 

Response: As indicated previously, 

the definition of what constitutes a 

significant contribution is provided by 

regulation, not by statute and, therefore, 

could be changed. We recognize the 

difficulty in determining the 

significance of a management 

contribution under the current 

definition and the appeal of a 

measurable, quantifiable standard. 

However, unlike labor, the significance 

of a management contribution is not 

appropriately measured by the amount 

of time a person spends doing the 

claimed contribution. The current 

regulatory definition of a significant 

contribution of active personal 

management has been in effect for over 

20 years; Congress has not mandated a 

more restrictive definition during that 

time, including in the 2008 Farm Bill. 

However, we are currently exploring 

whether the current definition could be 

amended in a manner that would be 

fair, equitable, and enhance program 

integrity. Therefore, no changes were 

made at this time as the result of this 

comment and other related comments. 

Comment: The ‘‘separate and distinct’’ 

requirement is not in the 2008 Farm 

Bill. The 2008 Farm Bill requires that 

the stockholders or members 

collectively make a significant 

contribution of labor or management. 

The examples in the preamble are 

unrealistic and reflect a division of labor 

that does not happen in the context of 

family farming. The rule should require 

that all the members together 

collectively make a contribution. 

Response: As indicated in the 

comment, the 2008 Farm Bill requires 

that the stockholders or members in a 

legal entity that is a corporation or 

similar entity collectively make a 

significant contribution of personal 

labor or active personal management. It 

does not, however, indicate what 

percentage of stockholders or members 

in the legal entity must collectively 

make that significant contribution. 

However, if the legal entity is general 

partnership, joint venture, or similar 

entity, the statute requires that each 

partner or member must make a 

significant contribution of personal 

labor or active personal management. 

Therefore, we did not make any changes 

to the rule in response to the comment. 

Comment: The provisions on joint 

and several liability appear to prohibit 

owner financing and situations where a 

third party lender requires secondary 

liability or other credit enhancements 

from interested persons where a loan is 

made to acquire an interest in a farming 

operation. Sound underwriting 

principles compel Farm Credit 

associations to require the very sort of 

credit enhancements that this rule 

appears to prohibit. Clarify why CCC is 

doing this. Why does the rule specify 

the interest rate and repayment 

schedule for the activities it appears to 

prevent? 

Provisions in §§ 1400.203 and 

1400.204 appear to say that if the 

capital, land, or equipment of an entity 

is acquired through a loan that is made 

to, guaranteed by, or co-signed by a 

person or entity that owns the farming 

entity, then that farming entity is not 

eligible for program payments. The rule 

does not appear to distinguish between 

loans made between financial entities 

and the farming entity, and loans made 

between persons or entities that may 

own the farming entity. Many 

commercial loans to farming entities use 

these very structures, and therefore this 

could make it difficult for farmers to 

both obtain credit and maintain 

payment eligibility. Similarly, the 

provisions about ‘‘prevailing interest 

rates’’ are vague. Rewrite this section so 

as not to infringe upon the lending 

relationships of farm entities and their 

financial institutions. 

Response: This rule does not prohibit 

any owner financing methods; it merely 

specifies the requirements for payment 

eligibility. The eligibility requirements 

include a requirement that contributions 

by a person or entity be made by that 

person or entity, which means that in 

the case of a financed contribution, that 

the eligible person or entity be 

responsible for the loan. The provisions 

on interest rates and repayment 

schedules are intended to ensure that 

there are not improperly favorable 

‘‘sweetheart’’ funding agreements 

between members of a farming 

operation set up for the purposes of 

evading payment eligibility provisions. 

We made minor technical corrections to 

the rule to clarify that the requirements 

for commensurate contributions are 

slightly different from those for 

significant contributions. 

Comment: FSA told a farmer that he 

is not eligible because someone had 

cosigned his loan. He owns a lot of 

equipment and rents his house, so he 

does have risk in the farming operation. 

How do you expect beginning farmers to 

get started without a little help? 

Response: If the person in question is 

not actively engaged in farming because 

they have not made the required 

contributions, then they are not eligible 

for payment. A person who is renting 

land from someone who also co-signed 

a loan may not meet the requirements 

for ‘‘actively engaged in farming.’’ We 

did not make a change to the rule in 

response to this comment. 

Comment: The current language 

appears to prohibit common joint 

financing arrangements currently in use. 

To fix that, replace the words ‘‘interest, 

and’’ in §§ 1400.203(b)(1)(iii) and 

1400.204(c)(1)(iii) with ‘‘interest, or.’’ 

The provisions in § 1400.203(b)(1) 

and (b)(2) appear to contradict each 

other, as do the provisions of 

§ 1400.204(c)(1) and (c)(2), concerning 

financing arrangements. If the second 

paragraph is in each case intended to be 

the exception to the first, then the words 

‘‘must not’’ should be replaced with 

‘‘should not’’ and the ‘‘and’’ connecting 

the two paragraphs should be replaced 

with an ‘‘or.’’ 


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Response: We will make a technical 

correction in the rule to make it more 

clear which requirements apply to 

commensurate contributions and which 

apply to significant contributions. 

Comment: In § 1400.203(c), add a 

requirement that no one person can 

provide the active labor, active 

management, or combination of labor 

and management for multiple farming 

operations collectively receiving more 

than one maximum payment. 

Response: ‘‘Actively engaged in 

farming’’ determinations are made based 

on contributions to a farming operation. 

A person or legal entity can be 

legitimately involved in multiple 

farming operations. We do not believe 

there is authority for the suggested 

change. Therefore, we did not make a 

change to the rule in response to this 

comment. 

Sec. 1400.204 Limited Partnerships, 

Limited Liability Partnerships, Limited 

Liability Companies, Corporations, and 

Other Similar Legal Entities 

Comment: The requirement that each 

member make a contribution of labor or 

management does not make sense in 

this situation where only one payment 

is being received (for multiple people in 

the family farm). For example, unless an 

elderly family member is providing 

active labor or management, the family 

will lose that percentage of program 

payments. 

Response: We agree that does not 

make sense. The intent of the provisions 

requiring that each member contribute 

active management or labor was to 

prevent the share of persons who were 

strictly passive investors in a legal 

entity from being eligible for payments. 

The intent was not to penalize smaller 

operations that have multiple members 

sharing payments less than or equal to 

the payment limit for one person or 

legal entity. Therefore, we added an 

exception if at least 50 percent of the 

stock is held by partners, stockholders, 

or members that are providing active 

personal labor or active personal 

management and the partners, 

stockholders, or members providing 

active personal labor or active personal 

management are collectively receiving 

total payments equal to or less than one 

limitation. 

Comments: The legal entity should be 

eligible if some of the members work off 

the farm because they have to; for 

example, an operation that is only a few 

hundred acres. 

All of the members should be eligible 

if the legal entity is solely owned by 

relatives, especially if they are siblings. 

The rule should add an exemption for 

small operations if 51 percent of the 

members are actively engaged. 

Not all the members in the family 

farm have the time, ambition, or skills 

to participate fully. Passive members of 

the entity may be doing the farm a favor 

by remaining passive. For farms with 

family members only, the actively 

engaged requirement should be either 

management and labor or land, capital, 

and equipment. 

In a family entity where all the 

members are a family and no-one is 

getting payments through another 

entity, all family members should be 

considered to be actively engaged. 

This section disincentivizes outside 

investment and distributing shares of a 

family corporation to family members 

who are not actively engaged in the 

operation. Many family farms have nonactively-engaged family members and 

outside investors as shareholders so that 

the operation can continue to the next 

generation. The decision to dilute 

ownership should not be deterred by the 

government. 

Response: In response to these 

comments, this rule adds an exemption 

if members who collectively hold at 

least 50 percent interest in the entity 

make a significant contribution, as 

described above. 

Comment: Allow the county 

committee to grant exceptions for family 

farms that are bona fide operations, but 

where some of the members do not 

provide commensurate contributions 

due to their age. 

Response: This rule adds an 

exemption if members who collectively 

hold at least 50 percent interest in the 

entity make a contribution, as described 

above. There will not be an additional 

provision for exceptions by the FSA 

county committee. 

Comment: Drop the requirement that 

each stockholder in a corporation be 

actively engaged in labor or 

management. Corporations can only get 

one payment; it is partnerships that are 

the problem. 

Response: The rule does not require 

that each stockholder be actively 

engaged; it requires that they make a 

contribution. This rule makes a change 

to require that stockholders who 

collectively hold at least 50 percent 

interest in the entity, rather than all of 

the stockholders, contribute. 

Comment: Allow members of an 

entity to make a ‘‘combined’’ 

contribution to qualify as actively 

engaged, and collectively share one 

payment limitation through direct 

attribution. 

Response: The changes in this rule to 

§§ 1400.203 and 1400.204 should permit 

this to occur in most situations. 

Comment: Section 1400.204(c)(1)(ii) 

has a ‘‘such joint operation’’ with no 

antecedent. Should this be ‘‘such legal 

entity?’’ 

Response: We corrected that in this 

rule. 

Comment: The 2008 Farm Bill 

requires that a person’s or entity’s share 

of the profits or losses be commensurate 

to their contribution and at risk, but it 

does not require that the risk of loss be 

commensurate with the claimed share of 

the operation. That is not realistic. 

There are good business reasons why 

risk is different, such as preferred stock. 

Response: In the case of a legal entity, 

such as a corporation, the risk of loss 

pertains to the legal entity, not the 

stockholders of the legal entity. 

Therefore, no changes were made in 

response to this comment. 

Comment: Change the definition of 

actively engaged to exclude corporate 

partners whose farming is solely to reap 

government benefits. An investor is not 

a farmer. 

Response: There is no statutory 

authority to make this specific change. 

However, if a scheme or device has been 

adopted, the provisions in § 1400.5 

would apply. Additionally, as indicated 

in response to a related comment, we 

are exploring whether the current 

definition of a significant contribution 

of active personal management could be 

amended in a manner that would be 

fair, equitable, and enhance program 

integrity. Therefore, no changes were 

made at this time as the result of this 

comment and other related comments. 

Comment: Active managers should be 

required to live within 20 miles of the 

farm they claim to manage. 

Response: This comment’s particular 

change was not made because it is very 

specific and might not apply to 

operations in different locations. It 

would not be unusual in a rural area for 

an active manager who works on the 

farm every day but does not live there 

to have a daily commute of more than 

20 miles to the farm. We made no 

change to the rule in response to this 

comment. 

Comment: To clarify spousal 

eligibility, add the words ‘‘or their 

spouses’’ after the words ‘‘ownership 

interest’’ in § 1400.204(a)(2). 

Response: We made that change in 

this rule. 

Sec. 1400.207 Landowners 

Comment: No landowner should get a 

subsidy if the land is rented by a real 

farmer and not owner-operated. 


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Absentee landowners should not get 

payments unless they are actively 

engaged. 

Response: As specified in the 2008 

Farm Bill, the regulation allows 

landowners to be eligible for payment 

only if they have a share in the risks and 

profits of the farming operation. In other 

words, landowners who receive a fixed 

rental payment regardless of the success 

of the farming operation are not 

‘‘producers,’’ are not considered to be 

‘‘actively engaged in farming’’ and are 

not eligible for payment. The previous 

rule added more specific language to 

clarify that absentee landowners will 

not be eligible to receive payment 

unless they have a share in the risks and 

profits of the farming operation. 

Therefore, we did not change the rule in 

response to these comments. 

Comment: Are members of a limited 

liability corporation (LLC) that rents 

land out on a share crop basis 

determined to be actively engaged under 

the landowner exemption? If so, clarify 

that in the rule. 

Response: If an LLC rents land, the 

LLC, rather than the members, would or 

would not be eligible for payment based 

upon a determination of the LLC’s 

eligibility. We did not change the rule 

in response to this comment. 

Comment: Add a paragraph (a)(4) to 

this section to read ‘‘rents the land at a 

rate that is usual and customary.’’ This 

is needed to avoid cut rate leases that 

are used to evade payment limits. 

Response: This language is not in the 

2008 Farm Bill, and we do not have the 

discretionary authority to add such 

additional requirements. Therefore, we 

did not change the rule in response to 

this comment. 

Sec. 1400.209 Sharecroppers 

Some commenters support all the 

changes to § 1400.209. 

Comment: The AGI limits will force 

landlords to change from crop share 

renting to cash basis, which will greatly 

increase the risk to the (crop share) 

farmer. The shift of farm payment from 

the landlord, who probably pays a 40 

percent income tax rate on the benefit, 

to the farmer, who probably pays a 20 

percent income tax rate, will reduce 

income tax revenue for the government. 

Taxpayers will lose. 

The paperwork burden is encouraging 

landowners to move from share rent to 

cash rent, which increases the risk for 

(renting) farmers. 

Response: The paperwork burden is 

necessary to implement payment 

limitation, payment eligibility, and 

average AGI provisions. The average 

AGI provisions are as specified in the 

2008 Farm Bill and we must implement 

them. The argument that the landlord 

pays a higher tax rate than the cash rent 

farmer on a farm program payment is 

not a sufficient justification to change 

the rule, since the government would 

spend even less if no payment were 

made at all due to ineligibility. The rule 

reflects the requirements of the 2008 

Farm Bill; therefore, we did not make 

any changes in response to the 

comment. 

Comment: Some renters have a 

landlord and also a separate owner or 

‘‘waterlord’’ who owns the water rights 

to the property. Waterlords are not 

allowed the same landlord exemption 

from actively engaged. They should be. 

If they do not get the exemption, they 

will shift from share rent to cash rent, 

which again increases the risk to (renter) 

farmers. 

Response: The 2008 Farm Bill does 

not mention waterlords; we have no 

authority to set separate eligibility 

requirements for them or to apply 

landowner provisions if, in fact, they are 

not the owner of the land being farmed. 

The rule reflects the requirements of the 

2008 Farm Bill; therefore, we did not 

make any changes in response to the 

comment. 

Sec. 1400.210 Deceased and 

Incapacitated Persons 

Comment: Explicitly state that if an 

individual member of a farming 

operation dies, all the surviving 

members should continue to receive 

timely payments for their share of the 

operation. 

Response: The regulation does not 

prevent payments to surviving persons 

if a deceased person was a member of 

the farming operation. The regulation 

also already specifically allows such 

payments to the estate of a deceased 

person, provided that a representative of 

the person’s estate provides the 

determining authority the requisite 

documentation that the person was, or 

intended to be, actively engaged in 

farming. If this comment is about direct 

and counter-cyclical payment program 

(DCP) enrollments, it is outside the 

scope of this rule; the DCP regulations 

are in 7 CFR part 1412. If the comment 

is about payments on behalf of the estate 

of a deceased person, the rule already 

addresses this situation; therefore, no 

change was made as a result of this 

comment. 

Subpart D—Cash Rent Tenants 

The following discussion addresses 

the comments received on Subpart D by 

section. 

Sec. 1400.301 Eligibility 

Comment: It is unreasonable to 

require the tenant to exercise complete 

control over the leased equipment for an 

entire crop year, when that equipment 

is leased from a landlord or from the 

same source as the hired labor. It is 

wasteful to leave equipment idle when 

it could otherwise be put to efficient 

use. 

Response: The section on cash rent 

tenants did not change significantly 

with the previous rule, so the 

requirement of a contribution of 

equipment and the complete control 

requirement are not new. The change 

made in the previous rule was to specify 

that ‘‘complete control’’ means 

‘‘exclusive access and use by the tenant.’’ 

To clarify further, the current 

regulations do not require that a tenant 

lease equipment for an entire crop year; 

the regulation only states that if a tenant 

is eligible for payment based on a 

contribution of equipment that such 

equipment be leased for the entire crop 

year. A cash rent tenant can be eligible 

for payment by contributing either labor 

or management and equipment. In other 

words, no contribution of equipment is 

required for a cash rent tenant to be 

eligible for payment if they make a 

significant contribution of labor to the 

farming operation instead. We did not 

change the rule based on this comment. 

Comment: The provisions about 

leased equipment are not feasible for 

custom farm work. For example, if a 

farmer hires someone to combine corn 

for a flat rate, it is impossible to separate 

into equipment lease and labor for the 

purposes of the regulation or the 902 

forms. With a custom flat rate, there is 

no risk to the farmer, like there would 

be if the farmer leases the equipment 

and breaks a belt, so it is in no way the 

same thing as a lease or separable into 

a lease and labor. Clarify in the rule, so 

it is applied consistently and correctly. 

Response: To be ‘‘actively engaged’’ as 

a cash rent tenant based on a 

contribution of equipment, the 

equipment must be leased and other 

requirements must be met. A custom 

farming contract is not a lease. The rule 

is consistent in the sense that it makes 

no mention of custom farming as 

qualifying a cash rent tenant as actively 

engaged. This is consistent with the 

2008 Farm Bill, which allows a 

recipient of custom farming services to 

be eligible if the person or legal entity 

is a landowner, adult family member of 

a family farming operation, 

sharecropper, or grower of hybrid seed. 

The 2008 Farm Bill explicitly prohibits 

us from making any other rules with 


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896 Federal Register / Vol. 75, No. 4 / Thursday, January 7, 2010 / Rules and Regulations 

respect to custom farming in terms of 

being ‘‘actively engaged.’’ Therefore, we 

did not make any changes in response 

to the comment. 

Comment: To clarify spousal 

eligibility, add the words ‘‘or their 

spouses’’ after the words ‘‘each member’’ 

in § 1400.301(d). 

Response: We made that change in 

this rule. 

Subpart E—Foreign Persons 

The following discussion addresses 

the comment received on Subpart E by 

section. 

Sec. 1400.402 Notification 

Comment: Section 1400.402, which 

sets forth notification requirements for 

both foreign and domestic legal entities, 

should be combined with section 

§ 1400.107, ‘‘Notification of Interests.’’ 

Response: Section 1400.402 is 

currently located in the subpart on 

Foreign Persons, because it specifically 

requires foreign and domestic legal 

entities to notify the county committee 

of foreign interests in that entity. We did 

not change the rule in response to this 

comment. 

Subpart F—Average Adjusted Gross 

Income Limitation 

The following discussion addresses 

the comments received on Subpart F by 

section. 

Sec. 1400.500 Applicability 

Comment: We support payment limits 

that deny payments to anyone whose 

average nonfarm AGI exceeds $500,000, 

and denying direct payments to anyone 

whose average farm AGI exceeds 

$750,000. 

Response: These requirements, as 

specified in the 2008 Farm Bill, were 

implemented in the previous rule and 

require no additional changes. 

Comment: We support the $1 million 

AGI cap for conservation program 

benefits, providing that the 75 percent 

farm income exemption remains intact. 

Response: The $1 million AGI cap for 

conservation program benefits, as 

specified in the 2008 Farm Bill, was 

implemented in the previous rule. There 

is an exception if not less than 66.66 

percent of that income is farm income. 

That 66.66 percent threshold was 

specified in the 2008 Farm Bill; there is 

no authority to change the threshold to 

75 percent, as suggested. Therefore, we 

did not make any changes in response 

to the comment. 

Comment: Consider alternatives to the 

AGI limits and provisions set in the 

2008 Farm Bill. Corporations making 

more than $250,000 in profit or where 

the shareholders are not at least 50 

percent immediate family members 

should be excluded. 

Reducing the AGI limit to $250,000 

might slow down the trend towards 

bigger and bigger farms driving the 

small ones out of business. 

The subsidy cap should be gross sales 

over $1 million. 

Farm income should exceed all other 

forms of income to be eligible for any 

payment. 

Farm income should be at least 25 

percent of total income to be eligible for 

any payment. 

The current AGI limits in the 2008 

Farm Bill would be devastating to 

America’s farmers, and any further 

reduction could lead us to rely on 

imported food as we do with oil today. 

Can you change the limits? 

Payment limits should be done by 

number of acres rather than income, 

because the big operators will always 

find a way to get around the AGI limits 

with shadow partners or big machinery 

purposes. The coverage should be for a 

certain number of acres, not a certain 

AGI. 

Use net income instead of gross, so 

that we can also collect social security. 

If there is going to be a gross income 

limit, it should be at least a million and 

probably two million, but there does 

need to be an upper income. Gross 

income is harder to manipulate than 

net, so it should probably be gross. 

Response: The 2008 Farm Bill was 

specific on the AGI provisions. The 

$500,000 limit on nonfarm AGI and the 

$750,000 limit on farm income were 

specified in the 2008 Farm Bill, as well 

as the general categories of what will be 

considered farm income. Therefore, we 

did not make any changes in response 

to the comments. 

Comment: Remove or delay 

implementation of the AGI limits. With 

no time to plan for these changes we 

will be forced to lay off farm hands, 

grow fewer crops and livestock, and 

increase food prices. 

Response: We must implement the 

requirements of the 2008 Farm Bill; 

therefore, we did not make any changes 

in response to the comments. 

Comment: Waive the AGI limit for 

conservation programs for cost-share 

forestry activities in priority areas 

identified by States per section 8002 of 

the 2008 Farm Bill. 

Response: The Secretary has the 

authority, as specified in the 2008 Farm 

Bill and in § 1400.500, to waive the AGI 

limit on a case-by-case basis for the 

protection of environmentally sensitive 

land of special significance. Forest 

stewardship activities in priority areas 

could meet that criteria, but such 

activities will be reviewed on a case-bycase basis. That is already specified in 

the rule, so we did not make any 

changes to the rule in response to this 

comment. 

Comment: Are the ‘‘previous 3 tax 

years’’ based on the crop year or the time 

of signup? For example, if one person 

signs up for 2011 DCP in October 2010, 

do they have the same 3 years for AGI 

calculation as someone who signs up for 

2011 DCP in January 2011? 

Response: For the purposes of 

determining the 3 applicable tax years, 

it does not matter when during a crop, 

fiscal, or program year a person signs up 

for the program. In this example, the 3 

applicable tax years would be 2007 

through 2009. We did not make any 

changes to the rule in response to this 

comment. 

Sec. 1400.501 Determination of 

Adjusted Gross Income 

Comments: Make it clear that wages 

from a farming operation or other entity 

is considered farm income for AGI 

purposes. 

Specifically reference IRS Schedule T 

for forest activities. 

Take into account that the IRS limits 

losses that can be claimed if a producer 

receives benefits, which could 

understate a producer’s losses while 

exaggerating AGI, unfairly resulting in 

program ineligibility. 

Are dividends from the activities 

listed here considered farm income? 

Include farm income, wages, and 

dividends as farm income for the 

purpose of the AGI rule. 

Are profits and losses from LLCs 

involved in the activities listed here 

considered farm income? 

If entities are involved in the list in 

§ 1400.501 and other activities, how are 

the dividends or profits allocated 

between farm and non-farm income? 

What about income derived or 

received from interests held in ethanol 

plants and processing facilities? 

Response: The provisions in the 

previous rule relating the determination 

of average adjusted gross farm income 

are based on the provisions in the 2008 

Farm Bill. The rule also indicated that 

the determination of average adjusted 

gross farm income would include any 

other activity related to farming, 

ranching, or forestry, as determined by 

the Deputy Administrator. Accordingly, 

the issue on wages and related issues in 

these comments will be addressed in 

handbook procedure. 

Comment: If a farmer sold some land, 

there could be a very large income in 

that year. Use at least a 5 year average 

AGI instead of a 3 year average AGI to 


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Federal Register / Vol. 75, No. 4 / Thursday, January 7, 2010 / Rules and Regulations 897 

avoid penalizing people in that 

example. 

Response: The 3 year average AGI 

provision was specified in the 2008 

Farm Bill, as were the general categories 

of what will be considered farm income. 

Therefore, we did not make any changes 

to the rule in response to the comments. 

Sec. 1400.502 Compliance and 

Enforcement 

Comment: A farmer should not have 

to certify my AGI every year, nor should 

the FSA office be reviewing tax returns. 

Farmers generally do not employ 

certified tax accountants for preparation 

of tax returns and that AGI certification 

would create undue hardship; third 

party verifiers (CPAs & lawyers) may be 

reluctant to assume liability for 

providing certifications. 

Response: The requirement to certify 

average AGI as required by CCC is not 

new and does not represent an 

unreasonable requirement. CCC believes 

that such certification is necessary to 

ensure that payments are made to 

persons and legal entities that qualify 

under the AGI limits set by Congress, 

and that payments are not made based 

on fraudulent AGI statements. We did 

not make any changes to the rule in 

response to the comment. 

Comments: Handle AGI verification in 

house, by sharing data with IRS. County 

offices should not be storing AGI 

records locally for everyone; have 

county offices verify only those records 

that do not pass the first screen against 

IRS data. 

Do not let the USDA have access to 

our IRS files. That is a clear violation of 

privacy, and the information will 

somehow, inevitably end up publicly 

available. Personal IRS data should not 

end up on an interest group Web site. 

Information obtained by USDA from 

the IRS should not be subject to FOIA. 

Investigation of IRS ‘‘red flagged’’ files 

should be done at a central FSA office, 

not at the county level, for reasons of 

expertise and confidentiality. 

Response: We are currently working 

with the Treasury Department to 

improve our methods for AGI 

verification while maintaining full 

privacy and confidentiality of this 

sensitive information. As in the 

previous rule, any information gathered 

for average AGI verification and 

compliance purposes is not subject to 

disclosure under FOIA. 

Comments: Let farmers use IRS 

enrolled agents to certify. 

Let farmers use tax preparers who are 

not IRS enrolled agents, attorneys, or 

CPAs to certify. 

Response: For average AGI 

certification purposes, both the 2002 

and 2008 Farm Bill allow a statement 

from a certified public accountant or 

from a third party acceptable to the 

Secretary. The decision was made that 

only an attorney is an acceptable third 

party qualified to provide such a 

statement. 

General Comments Received 

Some comments received on the 

previous rule provided general 

comments not related to any specific 

subpart or section of the interim rule. 

• Some of the general comments 

supported or opposed alternative 

proposals to the 2008 Farm Bill. In 

response, CCC is implementing the 2008 

Farm Bill and will implement any 

amendments if and when those 

amendments become law. 

• Some comments expressed general 

disapproval with the entire farm 

program, or with certain aspects of the 

program. In response, CCC does not 

have the authority to end the direct 

payments program, or any other 

program authorized by Congress. 

• Some comments expressed general 

views, rather than making specific 

suggestions for changes to this rule. In 

response, CCC welcomes the input but 

cannot make specific changes to the rule 

based on general views. 

• Some comments suggested changes 

to USDA programs outside the scope of 

CCC programs. In response, CCC does 

not have authority to make changes to 

rules for non-CCC programs. Also, we 

cannot change the DCP program or 

forms for DCP enrollment with this rule, 

because that is outside the scope of 7 

CFR part 1400. 

• Some comments and questions 

were about the forms used to apply for 

payments or verify income. While the 

forms were re-numbered in 2008 and 

have a different appearance than 

previously, the questions and 

information requested are essentially 

the same as for the past twenty years. 

We will address some of these 

comments by clarifying and updating 

our handbooks. 

The following comments, which 

generally fit into the categories just 

discussed, are outside the scope of this 

rule: 

• Bring back the CRC Plus program. 

• Strongly opposed to the current 

administration’s proposal to cap 

payments based on $500,000 gross farm 

revenue. 

• Strongly support the current 

administration’s proposal to cap 

payments based on $500,000 gross farm 

revenue. 

• Strongly oppose the proposal to 

phase out DCP and change the crop 

insurance program. 

• ACRE should be a one year 

commitment, and not require that the 

landlord agree. 

• New farm land should be eligible 

for DCP. 

• Farmers’ health insurance is 

increasing 40–50 percent this year. 

• Write gardening into the school 

curriculum. 

• A guaranteed farmer bailout every 

year is no less wrong than two or three 

bailouts for banks. Allowance to fail is 

part of capitalism. 

• Government should not be a reason 

that children are fat and unhealthy. 

• Do something about abuse of 

downer cows at slaughterhouses. 

• Do all you can to help factory farm 

animals. 

• Extend subsidies to farmers who 

grow vegetables, particularly those 

grown sustainably. Favor farms that sell 

locally and sustainably grown 

vegetables over farmers who sell too 

much grain that ends up in the 

international marketplace, devastating 

farmers in developing nations. 

• Create a simple system for vendors 

at farmers’ markets to accept the 

supplemental nutrition assistance 

program. 

• Help real farmers, not megafarms 

with investors. 

• Support local organic farmers. 

• Support community supported 

agriculture. 

• Farmers who are entities should not 

be banned from receiving USDA low 

interest loans. 

• CCC–509 does not work for Native 

Americans. 

• A guaranteed payment regardless of 

crop price or profit is not a safety net. 

With crop insurance, disaster assistance, 

and price support now in place, direct 

payments should be phased out. 

• Oppose direct payments because 

they distort the playing field in favor of 

large corporate farms. Eliminate all 

direct payments to farmers, and keep in 

place the price support programs. 

• Consider ways that the farm 

payments program can promote an 

increase in the acreage of deep-rooted 

grassland plant cover, preferably native 

grassland species. 

• The government should not be 

helping any farmer, large or small. Let 

the free market take place. This would 

allow small family farms to have a 

fighting chance against corporate farms. 

• Offer tax breaks or subsidies for 

organic farming or moving away from 

non-edible corn and into growing fruits 

and vegetables. 

• Re-direct subsidies to support 

insect, wildlife, and human 

communities. 


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898 Federal Register / Vol. 75, No. 4 / Thursday, January 7, 2010 / Rules and Regulations 

Summary of Changes to the Rule 

As discussed above, in response to the 

comments, we made changes to the rule. 

Also, we made a number of additional 

technical corrections and minor 

clarifications. The changes are 

summarized below. 

We added an exception for smaller 

operations to the requirement that every 

interest holder in a legal entity must 

provide active personal labor or active 

personal management. We clarified 

provisions concerning CRP and other 

conservation programs, so that the rule 

is consistent with current practice. 

We made the date for minor child 

determination consistent with the date 

for payment attribution. 

We corrected and clarified crossreferences between this part and other 

parts in this chapter, and corrected and 

clarified cross-references between 

sections in this part. We also fixed 

inconsistent terminology. We removed 

§ 1400.7, ‘‘Commensurate Contributions 

and Risk,’’ from subpart A because all of 

the provisions are duplicated in subpart 

C and to clarify that the provisions 

apply only to programs to which 

subpart C applies. We clarified the 

provisions for trusts and estates to make 

them consistent with other sections in 

this part regarding contributions. 

On other topics on which we received 

comments, we did not change the rule, 

but we provided additional clarification 

in the preamble and plan to add 

additional detail to our handbooks. 

These topics include: 

• Spousal eligibility for different 

types of joint operations, 

• Substantive change rules, 

• Financing of capital, land, and 

equipment contributions, 

• Withdrawal and resubmission of 

farm operating plans, and 

• The tax status of entities and 

income that is not relevant for the 

purposes of this part. 

Executive Order 12866 

The Office of Management and Budget 

(OMB) designated this final rule as 

significant and it was reviewed by the 

Office of Management and Budget 

(OMB) under Executive Order 12866. A 

Cost Benefit Analysis is summarized 

below and is available from the contact 

information listed above. 

Summary of Economic Impacts 

The 2008 Farm Bill requires major 

revisions of payment eligibility and 

payment limit regulations, which were 

implemented with the interim rule. 

The exception made by this rule to 

the requirement that all stockholders, 

partners, or members in an entity have 

to contribute personal labor or active 

personal management is expected to 

impact fewer than a thousand entities. 

The monetary impact is not substantial. 

Although those entities were impacted 

by the requirement imposed by the 

interim rule, they were still eligible for 

reduced payments based on the 

percentage of stockholders, partners, or 

members in the entity making the 

required contributions. The change 

made by this rule will allow full 

payment. 

This rule also implements minor 

technical corrections, such as correcting 

internal paragraph references, which are 

expected to have no substantive cost or 

benefit. 

There is estimated to be minimal cost 

to the government in implementing this 

regulation because the forms and 

procedures for determining payment 

eligibility are not changing. 

Regulatory Flexibility Act 

This rule is not subject to the 

Regulatory Flexibility Act since CCC is 

not required to publish a notice of 

proposed rulemaking for this rule. CCC 

is authorized by section 1601 of the 

2008 Farm Bill to issue an interim rule 

effective on publication with an 

opportunity for comment, which was 

done. 

Environmental Review 

CCC received one comment on the 

previous rule stating an EIS is needed to 

comply with NEPA. 

The environmental impacts of this 

final rule have been considered in a 

manner consistent with the provisions 

of the National Environmental Policy 

Act (NEPA), 42 U.S.C. 4321–4347, the 

regulations of the Council on 

Environmental Quality (40 CFR Parts 

1500–1508), and FSA’s regulations for 

compliance with NEPA (7 CFR part 

799). The changes to Payment 

Limitation and Payment Eligibility 

required by the 2008 Farm Bill that are 

identified in this rule are nondiscretionary. Therefore, FSA has 

determined that NEPA does not apply to 

this rule and no environmental 

assessment or environmental impact 

statement will be prepared. 

Executive Order 12372 

This program is not subject to 

Executive Order 12372, which requires 

consultation with State and local 

officials. See the notice related to 7 CFR 

part 3015, subpart V, published in the 

Federal Register on June 24, 1983 (48 

FR 29115). 

Executive Order 12988 

The final rule has been reviewed in 

accordance with Executive Order 12988. 

This rule is not retroactive and does not 

preempt State or local laws, regulations, 

or policies unless they present an 

irreconcilable conflict with this rule. 

Before any judicial action may be 

brought concerning the provisions of 

this rule, the administrative appeal 

provisions of 7 CFR parts 11 and 780 

must be exhausted. 

Executive Order 13132 

The policies contained in this rule do 

not have any substantial direct effect on 

States, on the relationship between the 

national government and the States, or 

on the distribution of power and 

responsibilities among the various 

levels of government. Nor does this rule 

impose substantial direct compliance 

costs on State and local governments. 

Therefore, consultation with the States 

is not required. 

Executive Order 13175 

The policies contained in this rule do 

not impose substantial unreimbursed 

direct compliance costs on Indian Tribal 

governments or have Tribal implications 

that preempt Tribal law. 

Unfunded Mandates 

This rule contains no Federal 

mandates under the regulatory 

provisions of Title II of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

for State, local or Tribal governments, or 

the private sector. In addition, CCC is 

not required to publish a notice of 

proposed rulemaking for this rule. 

Therefore, this rule is not subject to the 

requirements of sections 202 and 205 of 

UMRA. 

Federal Assistance Programs 

The title and number of the Federal 

assistance programs in the Catalog of 

Federal Domestic Assistance to which 

this final rule applies are: 

10.055—Direct and Counter-Cyclical 

Payments Program. 

10.069—Conservation Reserve Program. 

10.072—Wetlands Reserve Program. 

10.082—Tree Assistance Program. 

10.912—Environmental Quality 

Incentives Program. 

10.914—Wildlife Habitat Incentive 

Program. 

10.917—Agricultural Management 

Assistance. 

10.918—Ground and Surface Water 

Conservation—Environmental 

Quality. 

Incentives Program 

10.920—Grassland Reserve Program. 


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Federal Register / Vol. 75, No. 4 / Thursday, January 7, 2010 / Rules and Regulations 899 

This final rule also applies to the 

following Federal assistance programs 

that are not in the Catalog of Federal 

Domestic Assistance: 

• ACRE, 

• Emergency Assistance Program for 

Livestock, Honey Bees, and Farm-raised 

Fish (ELAP), 

• Livestock Forage Disaster Program 

(LFP), 

• Livestock Indemnity Program (LIP), 

• Supplemental Revenue Assistance 

Program (SURE), 

• Agricultural Water Enhancement 

Program (AWEP), 

• Chesapeake Bay Watershed Program 

(CBWP), 

• Conservation Stewardship Program 

(CSTP), 

• Cooperative Conservation 

Partnership Initiative (CCPI), and 

• Farm and Ranchland Protection 

Program (FRPP). 

Paperwork Reduction Act 

The regulations in this rule are 

exempt from the requirements of the 

Paperwork Reduction Act (44 U.S.C. 

Chapter 35), as specified in Section 

1601(c)(2) of the 2008 Farm Bill, which 

provides that these regulations be 

promulgated and the programs 

administered without regard to the 

Paperwork Reduction Act. 

We received comments on the 

previous rule that the forms require 

disclosure of information that should 

not be required and the burden for AGI 

compliance is excessive. The 

requirement to certify average AGI as 

required by CCC is not new and does 

not represent an inappropriate 

requirement. While the forms were renumbered in 2008 and have a different 

appearance than previously, the 

questions and information requested is 

essentially the same as for the last 20 

years. Therefore, the AGI certification is 

necessary to ensure that payments are 

made to persons and legal entities that 

qualify under the AGI limits set by 

Congress, and that payments are not 

made based on fraudulent AGI 

statements. 

E-Government Act Compliance 

CCC is committed to complying with 

the E-Government Act, to promote the 

use of the Internet and other 

information technologies to provide 

increased opportunities for citizen 

access to Government information and 

services, and for other purposes. 

List of Subjects in 7 CFR Part 1400 

Agriculture, Loan programs— 

agriculture, Conservation, Price support 

programs, Reporting and recordkeeping 

requirements. 

For the reasons discussed above, this 

rule amends 7 CFR part 1400 as follows: 

PART 1400—PAYMENT LIMITATION 

AND PAYMENT ELIGIBILITY FOR 2009 

AND SUBSEQUENT CROP, PROGRAM, 

OR FISCAL YEARS 

1. The authority citation continues to 

read as follows: 

Authority: 7 U.S.C. 1308, 1308–1, 1308–2, 

1308–3, 1308–3a, 1308–4, and 1308–5. 

2. Amend § 1400.1 as follows: 

a. In paragraph (a), introductory text, 

remove the words ‘‘parts 1421 and’’, and 

add, in their place, the words ‘‘parts 

1421, 1430, and’’, 

b. In paragraph (a)(2), add the words 

‘‘with respect to contracts approved on 

or after October 1, 2008 ’’ at the end, 

before the semicolon, 

c. Add paragraph (a)(8) to read as set 

forth below, and 

d. Revise paragraph (f) to read as set 

forth below. 

§ 1400.1 Applicability. 

(a) * * * 

(8) Subparts C and D of this part do 

not apply to the programs listed in 

paragraphs (a)(2) through (a)(7) of this 

section. 

* * * * * 

(f) The following amounts are the 

limitations on payments per person or 

legal entity for the applicable period for 

each payment or benefit. 

Payment or benefit 

Limitation 

per person 

or legal entity, per crop, 

program, or 

fiscal year 

(1) Direct Payments for covered commodities 1 ............... $40,000 

(2) Direct Payments for peanuts 1 ..................................... 40,000 

(3) CRP annual rental payments 2 .................................. 50,000 

(4) GRP .................................... 50,000 

(5) WHIP ................................... 50,000 

(6) WRP3 .................................. 50,000 

(7) Counter-Cyclical Payments 

for covered commodities 3 .... 65,000 

(8) Counter-Cyclical Payments 

for peanuts 3 .......................... 65,000 

(9) NAP payments .................... 100,000 

(10) Supplemental Agricultural 

Disaster Assistance 4 ............ 100,000 

(11) TAP ................................... 100,000 

(12) CSTP5 .............................. 200,000 

(13) EQIP .................................. 300,000 

1 If the person or legal entity has a direct or 

indirect interest in payments earned on a farm 

that is in ACRE, this limitation will reflect a 20 

percent reduction in direct payments on each 

farm that is participating in ACRE. 

2 Limitation is applicable to annual rental 

payments received directly and indirectly from 

all CRP contracts regardless of contract approval date, except payments received directly 

and indirectly under CRP contracts approved 

prior to October 1, 2008, may exceed the limitation, subject to payment limitation rules in effect on the date of contract approval. 3The payment limit does not apply to payments for perpetual or 30 year easements or 

under 30 year contracts. 4 Under ACRE, this amount will be a combined limitation for counter-cyclical and ACRE 

payments. If a person or legal entity has a direct or indirect interest in payments earned on 

a farm that is participating in ACRE, this limitation will reflect an increase for the amount 

that the direct payments were reduced. 5Total payments received under Supplemental Agricultural Disaster Assistance 

through SURE, LIP, LFP, and ELAP may not 

exceed $100,000. 6The $200,000 limit is the total limit for 

2009 through 2012. 

Note: AMA, AWEP, CBWP, CCPI, and 

FRPP are all limited by available funding rather then an amount by participant. 

§ 1400.2 [Amended] 

3. Amend § 1400.2 in paragraph (g) by 

removing the words ‘‘will not be made 

by a county FSA office’’ and adding, in 

their place, the words ‘‘will be made by 

the FSA State office’’. 

§ 1400.6 [Amended] 

4. Amend § 1400.6 in paragraph (a) by 

removing the words ‘‘joint ventures and 

general partnerships’’ and adding, in 

their place, the words ‘‘joint operations’’. 

§ 1400.7 [Removed and Reserved] 

5. Remove and reserve § 1400.7. 

§ 1400.101 [Amended] 

6. Amend § 1400.101, paragraph (a), 

by removing the date ‘‘April 1’’ and 

replacing it with the date ‘‘June 1’’. 

7. Amend § 1400.102 as follows: 

a. In paragraph (a), remove the 

reference to ‘‘§ 1400.1’’ and add, in its 

place, a reference to ‘‘§ 1400.1(a)(1)’’ and 

b. Revise paragraph (c) to read as set 

forth below. 

§ 1400.102 States, political subdivisions, 

and agencies thereof. 

* * * * * 

(c) The total payments described in 

paragraph (b) of this section cannot 

exceed $500,000 annually except for 

States with a population less than 

1,500,000, as established by the most 

recent U.S. Census Bureau annual 

estimate of such State’s resident 

population. 

§ 1400.104 [Amended] 

8. Amend § 1400.104 as follows: 

a. In paragraphs (a)(1) and (a)(2) add 

the word ‘‘or’’ at the end of the 

paragraph. 


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900 Federal Register / Vol. 75, No. 4 / Thursday, January 7, 2010 / Rules and Regulations 

b. In paragraphs (a)(3)(ii) and (a)(4)(v), 

remove the period at the end of the 

paragraph, and add a semicolon and the 

word ‘‘; or’’ in its place. 

c. In paragraphs (a)(4)(iii) and 

(a)(5)(iii), add the words ‘‘direct or 

indirect’’ before the word ‘‘control’’. 

9. Amend § 1400.105 by adding 

paragraphs (d)(1) and (d)(2) to read as 

follows: 

§ 1400.105 Attribution of payments. 

* * * * * 

(d) * * * 

(1) If the change in ownership interest 

is due to the death of an interest holder 

in the legal entity or the legal entity did 

not exist on June 1 of the applicable 

year, the Deputy Administrator may 

determine that a change after June 1 is 

considered relevant or effective for the 

current year. 

(2) Changes that occur after June 1 

cannot be used to increase the amount 

of program payments a legal entity, or 

its members, is eligible to receive 

directly or indirectly for the applicable 

year. 

* * * * * 

§ 1400.106 [Amended] 

10. Amend § 1400.106, paragraph (b), 

by removing the words ‘‘joint venture or 

general partnership’’ both times they 

appear and adding, in their place, the 

words ‘‘joint operation’’ and by 

removing the words ‘‘joint ventures or 

general partnerships’’ and adding, in 

their place, the words ‘‘joint operations’’. 

§ 1400.202 [Amended] 

11. Amend § 1400.202 as follows: 

a. In paragraph (c)(1) introductory 

text, remove the word ‘‘Must’’, and add, 

in its place, the words ‘‘To meet the 

requirements of paragraph (a)(1)(i) of 

this section, must’’ at the beginning of 

the paragraph, and 

b. In paragraph (c)(2) introductory 

text, remove the word ‘‘If’’, and add, in 

its place, the words ‘‘To meet the 

requirements of paragraphs (a)(2) and 

(a)(3) of this section, and if’’ at the 

beginning of the paragraph. 

§ 1400.203 [Amended] 

12. Amend § 1400.203 as follows: 

a. In paragraph (b)(1) introductory 

text, remove the words ‘‘Must be’’, and 

add, in its place, the words ‘‘To meet the 

requirements of paragraph (a)(1)(i) of 

this section, and if’’ at the beginning of 

the paragraph, and 

b. In paragraph (b)(2) introductory 

text, remove the word ‘‘If’’, and add, in 

its place, the words ‘‘To meet the 

requirements of paragraphs (a)(2) and 

(a)(3) of this section, and if’’ at the 

beginning of the paragraph. 

13. Amend § 1400.204 as follows: 

a. In paragraph (a)(2) introductory 

text, add the words ‘‘or their spouse 

with an ownership interest’’ after the 

words ‘‘ownership interest’’, 

b. In paragraph (a)(3), add the word 

‘‘collective’’ before the word 

‘‘contribution’’, 

c. Redesignate paragraph (c) as 

paragraph (d), 

d. Add new paragraph (c) to read as 

set forth below, 

e. In newly redesignated paragraph 

(d)(1) introductory text, remove the 

word ‘‘Must’’, and add, in its place, the 

words ‘‘To meet the requirements of 

paragraph (a)(1) of this section, must’’ at 

the beginning of the paragraph, 

f. In newly redesignated paragraph 

(d)(1)(ii), remove the words ‘‘Such joint 

operation’’ and add, in their place, the 

words ‘‘Such legal entity’’, and 

g. In newly designated paragraph 

(d)(2) introductory text, remove the 

word ‘‘If’’, and add, in its place, the 

words ‘‘To meet the requirements of 

paragraphs (a)(4) and (a)(5) of this 

section, and if’’ at the beginning of the 

paragraph. 

§ 1400.204 Limited partnerships, limited 

liability partnerships, limited liability 

companies, corporations, and other similar 

legal entities. 

* * * * * 

(c) An exception to paragraph (b) of 

this section will apply if: 

(1) At least 50 percent of the stock is 

held by partners, stockholders, or 

members that are actively providing 

labor or management and 

(2) The partners, stockholders, or 

members are collectively receiving, 

directly or indirectly, total payments 

equal to or less than one payment 

limitation. 

* * * * * 

14. Amend § 1400.205 as follows: 

a. Redesignate paragraphs (e) and (f) 

as (f) and (g) and 

b. Add new paragraph (e) to read as 

set forth below: 

§ 1400.205 Trusts. 

* * * * * 

(e) For a farming operation conducted 

by a trust in which the capital, land, or 

equipment is contributed by the trust, 

such capital, land, or equipment: 

(1) To meet the requirements of 

paragraph (a) of this section, must be 

contributed directly by the trust and 

must not be acquired as a loan made to, 

guaranteed, co-signed, or secured by: 

(i) Any person, legal entity, or joint 

operation that has an interest in such 

farming operation, including the trust’s 

income beneficiaries; 

(ii) Such joint operation by any 

person, legal entity, or other joint 

operation that has an interest in such 

farming operation; or 

(iii) Any person, legal entity, or joint 

operation in whose farming operation 

such trust has an interest, and 

(2) To meet the requirements of 

paragraphs (c) and (d) of this section 

and if land, capital or equipment is 

acquired as a result of a loan made to, 

guaranteed, co-signed, or secured by the 

persons, legal entities, or joint 

operations as defined, the loan must: 

(i) Bear the prevailing interest rate; 

and 

(ii) Have a repayment schedule 

considered reasonable and customary 

for the area. 

* * * * * 

15. Amend § 1400.206 as follows: 

a. Redesignate paragraph (b) as (c) and 

b. Add paragraph (b) to read as set 

forth below: 

§ 1400.206 Estates. 

* * * * * 

(b) For a farming operation conducted 

by an estate in which the capital, land, 

or equipment is contributed by the 

estate, such capital, land, or equipment: 

(1) To meet the requirements of 

paragraph (a) of this section, must be 

contributed directly by the estate and 

must not be acquired as a loan made to, 

guaranteed, co-signed, or secured by: 

(i) Any person, legal entity, or joint 

operation that has an interest in such 

farming operation, including the estate’s 

heirs; 

(ii) Such joint operation by any 

person, legal entity, or other joint 

operation that has an interest in such 

farming operation; or 

(iii) Any person, legal entity, or joint 

operation in whose farming operation 

such an estate has an interest; and 

(2) To meet the requirements of 

paragraphs (c)(3)and (a)(4) of this 

section, and if land, capital or 

equipment is acquired as a result of a 

loan made to, guaranteed, co-signed, or 

secured by the persons, legal entities, or 

joint operations as defined, the loan 

must: 

(i) Bear the prevailing interest rate; 

and 

(ii) Have a repayment schedule 

considered reasonable and customary 

for the area. 

* * * * * 

§ 1400.301 [Amended] 

16. Amend § 1400.301, in paragraph 

(d), by adding the words ‘‘or their 

spouse’’ after the word ‘‘member’’. 


cprice-sewell on DSK8KYBLC1PROD with NOTICES
Federal Register / Vol. 75, No. 4 / Thursday, January 7, 2010 / Rules and Regulations 901 

Signed in Washington, DC, on December 

30, 2009. 

Chris P. Beyerhelm, 

Acting Executive Vice President, Commodity 

Credit Corporation. 

[FR Doc. 2010–7 Filed 1–6–10; 8:45 am] 

BILLING CODE 3410–05–P 

DEPARTMENT OF TRANSPORTATION 

Federal Aviation Administration 

14 CFR Part 39 

[Docket No. FAA–2007–0096; Directorate 

Identifier 2007–NE–39–AD; Amendment 39– 

16141; AD 2009–26–06] 

RIN 2120–AA64 

Airworthiness Directives; Honeywell 

International Inc. ALF502 Series and 

LF507 Series Turbofan Engines 

AGENCY: Federal Aviation 

Administration (FAA), Department of 

Transportation (DOT). 

ACTION: Final rule. 

SUMMARY: The FAA is superseding an 

existing airworthiness directive (AD) for 

Honeywell International Inc. ALF502 

series and LF507 series turbofan engines 

with certain fuel manifold assemblies 

installed. That AD currently requires 

initial and repetitive on-wing eddy 

current or in-shop fluorescent penetrant 

inspections of certain part number (P/N) 

fuel manifold assemblies for cracks, and 

replacement of cracked fuel manifolds 

with serviceable manifolds. This AD 

continues to require inspecting those 

fuel manifolds for cracks, adds leak 

checks of certain additional P/N fuel 

manifolds, and specifies replacement of 

the affected manifolds as an optional 

terminating action in lieu of the 

repetitive inspections. This AD results 

from reports of fire in the engine 

nacelle. We are issuing this AD to detect 

cracks in certain fuel manifolds and fuel 

leaks from other fuel manifolds, which 

could result in a fire in the engine 

nacelle and a hazard to the aircraft. 

DATES: This AD becomes effective 

February 11, 2010. The Director of the 

Federal Register approved the 

incorporation by reference of 

AlliedSignal Service Bulletin (SB) ALF/ 

LF 73–1002, Revision 1, dated March 

24, 1997, listed in this AD as of 

February 11, 2010. The Director of the 

Federal Register previously approved 

the incorporation by reference of SB 

ALF/LF 73–1002, dated December 22, 

1995, listed in this AD as of July 28, 

1997 (62 FR 28994, May 29, 1997). 

ADDRESSES: You can get the service 

information identified in this AD from 

Honeywell International Inc., P.O. Box 

52181, Phoenix, AZ 85072–2181; 

telephone (800) 601–3099 (U.S.A.) or 

(602) 365–3099 (International); or go to: 

https://portal.honeywell.com/wps/ 

portal/aero. 

The Docket Operations office is 

located at Docket Management Facility, 

U.S. Department of Transportation, 1200 

New Jersey Avenue, SE., West Building 

Ground Floor, Room W12–140, 

Washington, DC 20590–0001. 

FOR FURTHER INFORMATION CONTACT: 

Robert Baitoo, Aerospace Engineer, Los 

Angeles Aircraft Certification Office, 

FAA, Transport Airplane Directorate, 

3960 Paramount Blvd., Lakewood, CA 

90712–4137; e-mail: 

robert.baitoo@faa.gov; telephone (562) 

627–5245; fax (562) 627–5210. 

SUPPLEMENTARY INFORMATION: The FAA 

proposed to amend 14 CFR part 39 by 

superseding AD 97–11–05, Amendment 

39–10034 (62 FR 28994, May 29, 1997), 

with a proposed AD. The proposed AD 

applies to Honeywell International Inc. 

ALF502 series and LF507 series 

turbofan engines with certain fuel 

manifold assemblies installed. We 

published the proposed AD in the 

Federal Register on April 13, 2009 (74 

FR 16803). That action proposed to 

continue to require inspecting those fuel 

manifolds for cracks, would also add 

leak checks of certain additional P/N 

fuel manifolds, and would specify 

replacement of the affected manifolds as 

an optional terminating action in lieu of 

the repetitive inspections. 

Examining the AD Docket 

You may examine the AD docket on 

the Internet at http:// 

www.regulations.gov; or in person at the 

Docket Operations office between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. The AD docket 

contains this AD, the regulatory 

evaluation, any comments received, and 

other information. The street address for 

the Docket Operations office (telephone 

(800) 647–5527) is provided in the 

ADDRESSES section. Comments will be 

available in the AD docket shortly after 

receipt. 

Comments 

We provided the public the 

opportunity to participate in the 

development of this AD. We received no 

comments on the proposal or on the 

determination of the cost to the public. 

Clarification in Optional Terminating 

Action Paragraph 

Paragraph (i) of this AD is partially 

revised from, ‘‘* * * terminates the 

repetitive inspection requirement 

specified in paragraphs (f)(1)(iii), 

(f)(2)(iii), (g), and (h) of this AD.’’ to 

‘‘* * * terminates the inspection 

requirement of this AD.’’ This change 

was made because replacing a fuel 

manifold assembly that has a P/N 

specified in paragraph (i) of this AD, or 

an FAA-approved equivalent part, 

terminates all inspection requirements 

of this AD. 

Conclusion 

We have carefully reviewed the 

available data and determined that air 

safety and the public interest require 

adopting the AD with the change 

described previously. We have 

determined that this change will neither 

increase the economic burden on any 

operator nor increase the scope of the 

AD. 

Costs of Compliance 

We estimate that this AD will affect 

156 engines installed on airplanes of 

U.S. registry. We also estimate that it 

will take about 7 work-hours per engine 

to perform the required actions, and that 

the average labor rate is $80 per workhour. Required parts will cost about 

$50,000 per engine. Based on these 

figures, we estimate the total cost of this 

AD to U.S. operators to be $7,887,360. 

Authority for This Rulemaking 

Title 49 of the United States Code 

specifies the FAA’s authority to issue 

rules on aviation safety. Subtitle I, 

Section 106, describes the authority of 

the FAA Administrator. Subtitle VII, 

Aviation Programs, describes in more 

detail the scope of the Agency’s 

authority. 

We are issuing this rulemaking under 

the authority described in Subtitle VII, 

Part A, Subpart III, Section 44701, 

‘‘General requirements.’’ Under that 

section, Congress charges the FAA with 

promoting safe flight of civil aircraft in 

air commerce by prescribing regulations 

for practices, methods, and procedures 

the Administrator finds necessary for 

safety in air commerce. This regulation 

is within the scope of that authority 

because it addresses an unsafe condition 

that is likely to exist or develop on 

products identified in this rulemaking 

action. 

Regulatory Findings 

We have determined that this AD will 

not have federalism implications under 

Executive Order 13132. This AD will 

not have a substantial direct effect on 

the States, on the relationship between 

the national government and the States, 

or on the distribution of power and 

responsibilities among the various 

levels of government. 


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