This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

60739 

Vol. 79, No. 195 

Wednesday, October 8, 2014 

DEPARTMENT OF AGRICULTURE 

Farm Service Agency 

7 CFR Parts 761, 762, 763, 764, and 765 

RIN 0560–AI25 

Farm Loan Programs; Entity Eligibility 

AGENCY: Farm Service Agency, USDA. 

ACTION: Interim final rule. 

SUMMARY: The Farm Service Agency 

(FSA) is amending the Farm Loan 

Programs (FLP) regulations for loan 

making and servicing on eligibility 

conditions for certain legal entities, 

allowing additional flexibility for loan 

applicants to meet the required farming 

experience, and increasing the 

maximum total indebtedness on 

Microloans (ML) to $50,000. The 

changes implement provisions of the 

Agricultural Act of 2014 (2014 Farm 

Bill). The changes will help increase the 

number of entities eligible to participate 

in certain FLP loans and adjust to better 

reflect the changes in the way farms are 

owned and operated by legal entities. 

The changes will allow FSA to extend 

credit and servicing to family farm 

operations that may have been ineligible 

under existing regulations. 

DATES: Effective date: November 7, 

2014. 

Comment date: We will consider 

comments that we receive by: December 

8, 2014. 

ADDRESSES: We invite you to submit 

comments on this rule. In your 

comment, please specify RIN 0560–AI25 

and include the volume, date, and page 

number of this issue of the Federal 

Register. You may submit comments by 

either of the following methods: 

• Federal eRulemaking Portal: Go to 

http://www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Director, Loan Making 

Division, the Farm Loan Program (FLP), 

FSA, U.S. Department of Agriculture, 

1400 Independence Avenue SW., Stop 

0522, Washington, DC 20250–0522. 

Comments will be available for 

viewing online at http://

www.regulations.gov. In addition, 

comments will be available for public 

inspection at the above address during 

business hours from 8 a.m. to 5 p.m., 

Monday through Friday, except 

holidays. 

FOR FURTHER INFORMATION CONTACT: 

Steven K. Ford; telephone: (202) 304– 

7932. Persons with disabilities or who 

require alternative means for 

communications (Braille, large print, 

audiotape, etc.) should contact the 

USDA Target Center at (202) 720–2600 

(voice). 

SUPPLEMENTARY INFORMATION: 

Background 

FSA makes and services a variety of 

direct and guaranteed loans to farmers 

who are temporarily unable to obtain 

private commercial credit. FSA also 

provides direct loan customers with 

credit counseling and supervision to 

enhance their opportunity for success. 

FSA loan applicants are often beginning 

farmers and socially disadvantaged 

farmers who do not qualify for 

conventional loans because of 

insufficient net worth or established 

farmers who have suffered financial 

setbacks due to natural disasters or 

economic downturns. FSA loans are 

tailored to a customer’s needs and may 

be used to buy farmland and to finance 

agricultural production. 

As discussed below, this rule amends 

the FLP regulations for loan making and 

servicing on eligibility conditions for 

certain legal entities, allowing 

additional flexibility for loan applicants 

to meet the required farming experience, 

and increasing the maximum total 

indebtedness on ML to $50,000. 

FSA is implementing the amendments 

included in this rule in keeping with the 

related provisions in the 2014 Farm Bill 

(Pub. L. 113–79). 

Eligible Entities 

Sections 5001, 5002, 5101, and 5201 

of the 2014 Farm Bill amend eligibility 

criteria in the Consolidated Farm and 

Rural Development Act (CONACT, 7 

U.S.C. 1981–2008r) for various FSA 

loans allowing FSA to include other 

legal entities the Secretary considers 

appropriate. (See CONACT sections 

302(a) (7 U.S.C. 1922(a)), 304(c) (7 

U.S.C. 1924(c)), 311(a) (7 U.S.C. 1941(a), 

and 321(a) (7 U.S.C. 1961(a).) Prior to 

the 2014 Farm Bill, FSA could only lend 

to those legal entity types specifically 

mentioned in the CONACT. In many 

situations, FSA had to require a family 

farm to modify its operating structure in 

order to qualify for an FLP loan. 

Otherwise, FSA determined that the 

loan applicant was ineligible for the FLP 

loans. 

FSA supports farmers structuring 

their operations to take advantage of 

financial planning techniques that 

entity arrangements have to offer. 

Therefore, to implement the 2014 Farm 

Bill amendments to the CONACT 

mentioned above, FSA is amending the 

definition of an entity in 7 CFR 761.2 to 

include a type of organization, as 

determined by the Secretary, authorized 

to conduct business in the state in 

which it operates. There are two types 

of organizations that continue to be 

ineligible—estates and nonprofit 

organizations. 

FSA will not include estates as an 

eligible entity since they are designed to 

be temporary in nature, and not an 

ongoing business entity. Nonprofit 

organizations also will not be 

considered an eligible entity since they 

are inconsistent with FSA’s mission to 

establish and improve family farm 

operations and assist them in becoming 

profitable and self-sufficient so they 

may qualify for commercial credit. 

All other existing rules regarding 

operating a family farm, availability of 

other credit, and individual liability for 

debt will continue to apply. 

Definition of ‘‘Farm’’ and ‘‘Family 

Farm’’ 

For clarity, FSA is amending the 

definition of ‘‘family farm’’ in 7 CFR 

761.2 to specify that ‘‘family farm’’ 

refers to the farm business operation, 

not real estate. This clarification reflects 

FSA’s long-standing interpretation and 

application of the term ‘‘family farm’’ as 

the business operation and ‘‘farm’’ as 

the farm real estate. Minor amendments 

are included in §§ 762.120, 763.5, and 

764.152 to clarify that the term ‘‘family 

farm’’ refers to the business operation 

and the word ‘‘farm’’ refers to real 

estate. 

Eligibility of Certain Operating-Only 

Entities 

Section 5001(a) of the 2014 Farm Bill 

amends section 302(a)(2) of the 


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60740 Federal Register / Vol. 79, No. 195 / Wednesday, October 8, 2014 / Rules and Regulations 

CONACT (7 U.S.C. 1922(a)(2)) to allow 

an operating entity to meet the owneroperator requirements and thereby 

qualify for a direct or guaranteed Farm 

Ownership (FO) loan, provided the 

individuals that are the owners of the 

farm (real estate) own at least 50 percent 

of the family farm (operating entity). 

The 2014 Farm Bill specifies ‘‘more than 

50 percent’’ and also permits the 

Secretary to determine another 

appropriate percentage of ownership. 

Frequently, two-person entities are 

established using equal (50/50) 

ownership shares. Therefore, FSA 

determined that the appropriate 

percentage of ownership is ‘‘at least 50 

percent.’’ 

To qualify for an FO loan, a loan 

applicant must be or become an owner 

and operator of a family farm. Prior to 

this rule, borrowers were required to 

own the farm real estate in the same 

legal manner as they operated the farm. 

This practice has become less common. 

Many family farm operations may own 

the farm real estate under a separate 

legal entity, which facilitates estate 

planning and the transfer of farm assets 

between generations. In many 

situations, the individuals that own the 

farm real estate and those operating the 

family farm business are identical even 

though multiple entities are involved. 

FSA is amending 7 CFR 762.120 and 

764.152 to allow an applicant that is an 

entity and that does not own a farm (real 

estate) to qualify for an FO loan if the 

individuals who own the farm own at 

least 50 percent of the family farm 

(operating entity). 

Similarly, 7 CFR 763.5 is being 

amended for the Land Contract 

Guarantee Program to reflect the 

eligibility of certain operating-only 

entities meeting the at least 50 percent 

ownership requirement. 

These changes allow existing 

operations to maintain their operating 

structure, and allow new FLP borrowers 

to structure their operations in a manner 

that works best for them. These 

amendments will allow FSA to extend 

credit to family farm operations that 

may have been ineligible under existing 

regulations. 

This rule also includes minor 

amendments to existing language in 7 

CFR 762.120 and 7 CFR 762.152 

addressing the treatment of entity 

applicants who are related or not related 

by blood or marriage. The authority for 

this change is in section 302(a)(1) of the 

CONACT (7 U.S.C. 1922). This change 

was needed to make the Direct Loan and 

Guaranteed Loan program regulations 

consistent. 

In 7 CFR 761.2, FSA is clarifying the 

definition of ‘‘operator’’ to specify that 

operating-only entities may be 

considered owner-operators when the 

individuals that own the farm real estate 

own at least 50 percent of the family 

farm (operating entity). 

Eligibility of Certain Embedded Entities 

Sections 5001, 5101, and 5201 of the 

2014 Farm Bill amend FLP eligibility 

criteria to allow an applicant that is 

owned by another entity or entities 

(‘‘embedded entities’’), to qualify for 

direct or guaranteed FO, direct or 

guaranteed Operating Loans (OL), or 

Emergency Loans (EM) provided that 

the individuals that own the family farm 

own at least 75 percent of each 

embedded entity. 

Previously, FSA required all entity 

applicants to be owned by individuals 

and not other entities. This requirement 

was established to help direct FLP loan 

funds to family farms as intended and 

avoid larger, more complex operations. 

However, over time this rule has 

become a barrier for many family farm 

operations. It has become an 

increasingly common business practice 

to separate certain segments of family 

farm operations for liability and 

financial planning reasons. Many 

operations are structured this way to 

facilitate the entry and exit of family 

members as operations grow and age. 

Therefore, this rule adds a definition 

of ‘‘embedded entity’’ and ‘‘entity 

member’’ to 7 CFR 761.2, which will 

apply to all FLP loans. These changes 

will allow entity applicants to be 

eligible even if members of the entity 

applicant are entities themselves. 

‘‘Entity member’’ will mean all 

individuals and all embedded entities, 

as well the individual members of the 

embedded entities, having an ownership 

interest in the assets of the entity. 

In addition, FSA is modifying 7 CFR 

762.120, 763.5, and 764.101 to allow 

multiple levels of entity ownership, 

provided at least 75 percent of each 

embedded entity is owned by 

individuals actively managing or 

operating the family farm. Adding the 

limitation that the individuals making 

up the at least 75 percent ownership 

must be actively managing or operating 

the family farm is an essential 

requirement, and is consistent with 

FSA’s mission to assist family farm 

operations. The requirement for at least 

75 percent of the owners to be active 

operators or managers separates out 

those who are simply investors when 

applying the 75 percent test. 

Furthermore, existing rules governing 

the family farm and test for credit will 

remain in place to further ensure FLP 

funds are targeted to family farms 

otherwise unable to obtain credit. This 

approach meets FSA’s mission to 

provide credit to family farm operators 

rather than larger farming operations 

with many investors. 

FSA is modifying 7 CFR 762.130 and 

764.402 to require debt instruments for 

Direct and Guaranteed loans be 

executed to show evidence for liability 

of any embedded entity, as well as the 

applicant and all individuals in all 

entities. The change is needed to protect 

the government’s interest and ensure 

collectability of the debt. 

FSA is modifying 7 CFR 763.7 and 

764.51 to change the requirements from 

requiring ‘‘current personal financial 

statements from each member of the 

entity’’ to remove the word ‘‘personal’’ 

and to require ‘‘current financial 

statements from each member of the 

entity.’’ These changes are being made 

as a conforming change resulting from 

the allowance of embedded entities. 

Finally, FSA is making conforming 

changes in 7 CFR part 765 to address the 

transfer or assumption to other entities. 

In § 765.401, the requirement to assume 

personal liability for the loan was 

required for the entity and each 

member—it is being changed to the 

entity and each entity member. In 

§ 765.402, several conforming changes 

are being made to reflect entity members 

instead of just members (which 

previously was assumed to be 

individual members), and to expand the 

types of entities to include other legal 

business organizations as determined by 

the Secretary. 

Direct Farm Ownership Experience 

Requirement 

Section 5001(b) of the 2014 Farm Bill 

amends provisions for direct FO loans, 

allowing the Secretary additional 

flexibility to establish requirements for 

a loan applicant to meet the test that 

they have participated in the operation 

of a farm for at least 3 years. 

Previously, an applicant for a direct 

FO had to have participated in the 

operations of a farm for at least 3 years. 

The rule was established to encourage a 

responsible path toward starting and 

growing a farming operation. However, 

this 3-year requirement has proven to be 

overly restrictive and incompatible with 

the current mode of entry for many 

beginning farmers. Section 5001(b) of 

the 2014 Farm Bill allows applicants to 

demonstrate previous experience by 

having participated in the business 

operations of a farm or ranch for not less 

than 3 years or having other acceptable 

experience for a period of time as 

determined by the Secretary. 

Many of today’s beginning farmers do 

not have farm backgrounds, but come to 

the industry through a variety of 


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Federal Register / Vol. 79, No. 195 / Wednesday, October 8, 2014 / Rules and Regulations 60741 

avenues such as post-secondary 

education, farm apprenticeship, veteran 

training, and extension programs. The 3- 

year requirement provides a reasonable 

foundation for successful farm 

ownership, but ignores certain training 

and experiences that can be just as 

valuable, and in some cases more 

valuable than limited farm business 

operations experiences. A formal 

farming apprenticeship, operation or 

management of a non-farm business, 

leadership or management experience 

while serving in any branch of the 

military, advanced education in an 

agricultural field, and significant 

experience in a farm-related agricultural 

career are examples of experiences that 

can provide some of the knowledge, 

skills, and abilities essential for 

successful farm ownership. FSA 

concluded that while some actual farm 

operational experience remains 

essential, it is reasonable to consider 

other work, business, or education as 

contributing toward a portion of the 3 

year requirement. Therefore, FSA is 

modifying both the definition of 

‘‘participated in the business operations 

of a farm’’ in 7 CFR 761.2 and the 

requirement in 7 CFR 764.152 to 

acknowledge the value of these other 

experiences. 

ML Changes 

FSA revised the direct OL regulations 

to implement the ML Program to better 

serve the unique operating needs of 

small family farm operations through a 

rule published in the Federal Register 

on January 17, 2013 (78 FR 3828–3836). 

The purpose of the ML Program is to 

make the OL program more widely 

available and useful to small operators 

through reduced application 

requirements, faster application 

processing, and added flexibility in 

meeting the managerial ability eligibility 

requirement. The ML Program was 

implemented with the requirement that 

both the loan amount and the 

applicant’s total FSA OL indebtedness, 

at the time of loan closing, would not 

exceed $35,000. Section 5106 of the 

2014 Farm Bill allows the Secretary to 

set the maximum for the total principal 

indebtedness outstanding at any one 

time for ML made to any one borrower 

at $50,000. The regular OL application 

process will be used for OL requests and 

applicant indebtedness that exceed the 

maximum amount. 

During the rulemaking process that 

implemented the ML Program, there 

were suggestions to set the ML 

maximum at a higher level or lower 

level than the proposed $35,000. FSA 

agreed to review the success of the ML 

Program and reevaluate the loan 

amounts periodically. The average ML 

obligated during the first year of 

implementation is $19,800. ML made at 

the $35,000 maximum amount account 

for nearly 25 percent of all direct OLs 

currently made since the ML Program 

began. Therefore, this rule is amending 

the maximum amount for MLs to 

$50,000. 

Notice and Comment 

In general, the Administrative 

Procedure Act (APA, 5 U.S.C. 553) 

requires that a notice of proposed 

rulemaking be published in the Federal 

Register and interested persons be given 

an opportunity to participate in the 

rulemaking through submission of 

written data, views, or arguments with 

or without opportunity for oral 

presentation, except when the rule 

involves a matter relating to public 

property, loans, grants, benefits, or 

contracts (5 U.S.C. 553(a)(2)). Although 

FSA could use the APA exemption and 

publish this rule as a final rule without 

the opportunity for public comment, 

FSA is implementing the regulatory 

changes through an interim rule to 

provide an opportunity for public 

comment while also implementing the 

rule without unnecessary delay to 

benefit FSA customers with the 

additional flexibility provided by the 

changes. 

Executive Order 12866 and 13563 

Executive Order 12866, ‘‘Regulatory 

Planning and Review,’’ and Executive 

Order 13563, ‘‘Improving Regulation 

and Regulatory Review,’’ direct agencies 

to assess all costs and benefits of 

available regulatory alternatives and, if 

regulation is necessary, to select 

regulatory approaches that maximize 

net benefits (including potential 

economic, environmental, public health 

and safety effects, distributive impacts, 

and equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. 

The Office of Management and Budget 

(OMB) designated this rule as 

significant under Executive Order 

12866, ‘‘Regulatory Planning and 

Review,’’ and, therefore, OMB has 

reviewed this rule. The estimated costs 

and benefits of this rule are summarized 

below. The full cost benefit analysis is 

available on regulations.gov. 

Clarity of the Regulation 

Executive Order 12866, as 

supplemented by Executive Order 

13563, requires each agency to write all 

rules in plain language. In addition to 

your substantive comments on this rule, 

we invite your comments on how to 

make the rule easier to understand. For 

example: 

• Are the requirements in the rule 

clearly stated? Are the scope and intent 

of the rule clear? 

• Does the rule contain technical 

language or jargon that is not clear? 

• Is the material logically organized? 

• Would changing the grouping or 

order of sections or adding headings 

make the rule easier to understand? 

• Could we improve clarity by adding 

tables, lists, or diagrams? 

• Would more, but shorter, sections 

be better? Are there specific sections 

that are too long or confusing? 

• What else could we do to make the 

rule easier to understand? 

Cost Benefit Analysis Summary 

Legal entities (partnerships, LLCs, 

etc.) comprised 13.3 percent of all farms 

(2012 Census of Agriculture). While the 

number of entities has remained 

relatively stable over the past 20 years, 

the complexity of their business 

structures has increased. One example 

is farm land ownership. Given high land 

prices and huge capital requirements, 

many farm operations lack the financial 

resources to purchase full ownership of 

farmland tracts that they operate and 

consequently, some have turned to 

alternative business structures where 

farmland is owned by an entity. Prior to 

the implementation of this rule, family 

farms using such strategies to acquire 

farmland may have found themselves 

ineligible for FSA credit programs. This 

is because the regulations prior to this 

rule change required the farm real estate 

to be owned by the same legal structure 

as the farm operation. This rule change 

will permit a family farm entity to 

receive an FO loan as long as the family 

farm entity resulting after the loan is 

closed is at least 50-percent owned by 

the owners of the farm real estate, 

provided all other loan eligibility 

requirements are satisfied. 

Embedded entities—where the 

members of an entity are entities 

themselves—provide another example 

of increasingly complex business 

structures. Though not widespread, a 

noteworthy number of family farm 

operations organized as legal entities are 

owned partly or wholly by one or more 

embedded entities. The FSA Direct 

Attribution Reporting data base 

indicates that, in 2013, about 11 percent 

of all entities receiving payments had an 

embedded entity. Such entities would 

have been ineligible for FSA farm loans 

because regulations stipulated that an 

entity owned by one or more other 

entities was ineligible for an FSA farm 

loan. The changes implemented in this 


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60742 Federal Register / Vol. 79, No. 195 / Wednesday, October 8, 2014 / Rules and Regulations 

rule would allow such entities to be 

eligible for FSA loans as long as each 

embedded entity is at least 75-percent 

owned by embedded entity members 

actively involved in managing or 

operating the family farm, and provided 

that all other eligibility requirements are 

satisfied. 

Many new family farm entrants are 

neither raised on a farm nor have 

specific experience operating a farm 

business, but may have the experience 

or the knowledge necessary to manage 

a farm business. Prior to 

implementation of this rule, an FO 

applicant was required to have 

participated in the management of a 

farm business for at least 3 years. 

Changes implemented by this rule allow 

other non-traditional avenues, such as 

post-secondary education, farm 

apprenticeship, leadership or 

management experience while serving 

in any branch of the military, or 

extension programs to count toward the 

3 year experience requirement. 

In 2012, FSA implemented the 

microloan program to provide greater 

flexibility in serving the needs of small 

and beginning farm businesses. This 

rule increases the maximum microloan 

size (and maximum direct operating 

loan indebtedness for borrowers 

receiving such loans) from $35,000 to 

$50,000. 

Combined, the three provisions in this 

rule are expected to enable FSA to 

benefit 2,210 farm businesses through 

direct and guaranteed loan programs. 

Changes to entity eligibility 

requirements are expected to enable 

FSA to serve an additional 660 entities. 

Changes in the farm business experience 

eligibility requirement are expected to 

impact 650 beginning farmers who will 

be able to benefit from FSA credit 

programs earlier than under the prior 

regulations. In the context of the entire 

direct and guaranteed loan portfolio, the 

additional 1,310 farm businesses 

impacted by revised entity eligibility 

and farm business experience 

requirements should increase demand, 

though the overall impacts should be 

marginal. And finally, changes to the 

ML program will only affect new or 

existing borrowers with total direct 

operating loan indebtedness between 

$35,000 and $50,000, and are estimated 

at 900 borrowers of which 100 are 

forecast to be new borrowers. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act (5 

U.S.C. 601–612), as amended by the 

Small Business Regulatory Enforcement 

Fairness Act of 1996 (SBREFA), 

generally requires an agency to prepare 

a regulatory flexibility analysis of any 

rule whenever an agency is required by 

APA or any other law to publish a 

proposed rule, unless the agency 

certifies that the rule will not have a 

significant economic impact on a 

substantial number of small entities. 

This rule is not subject to the Regulatory 

Flexibility Act because as noted above, 

this rulemaking is exempt from the 

notice and comment rulemaking 

requirements of APA and no other law 

requires that a proposed rule be 

published for this rulemaking initiative. 

Environmental Review 

The environmental impacts of this 

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 the FSA regulations for 

compliance with NEPA (7 CFR part 

1940, subpart G). All changes included 

in the rule are required by the 2014 

Farm Bill, with some minor 

discretionary decisions on the 

implementation methods. FSA 

concluded that this rule will not have a 

significant impact on the quality of the 

human environment either individually 

or cumulatively and, therefore, is 

categorically excluded and not subject 

to environmental assessments or 

environmental impact statements in 

accordance with 7 CFR 1940.310(e)(3). 

Executive Order 12372 

Executive Order 12372, 

‘‘Intergovernmental Review of Federal 

Programs,’’ requires consultation with 

State and local officials that would be 

directly affected by proposed federal 

financial assistance. The objectives of 

the Executive Order are to foster an 

intergovernmental partnership and a 

strengthened Federalism, by relying on 

State and local processes for State and 

local government coordination and 

review of proposed Federal Financial 

assistance and direct Federal 

development. For reasons set forth in 

the final rule related notice regarding 7 

CFR part 3015, subpart V (48 FR 29115, 

June 24, 1983), the programs and 

activities within this rule are excluded 

from the scope of Executive Order 

12372. 

Executive Order 12988 

This rule has been reviewed under 

Executive Order 12988, ‘‘Civil Justice 

Reform.’’ This rule will not preempt 

State or local laws, regulations, or 

policies unless they represent an 

irreconcilable conflict with this rule. 

The rule will not have retroactive effect. 

Before any judicial action may be 

brought regarding the application of the 

provisions of this rule, the 

administrative appeal provisions of 7 

CFR parts 11 and 780 are to be 

exhausted. 

Executive Order 13132 

This rule has been reviewed under 

Executive Order 13132, ‘‘Federalism.’’ 

The policies contained in this rule do 

not have any substantial direct effect on 

States, on the relationship between the 

Federal government and the States, or 

on the distribution of power and 

responsibilities among the various 

levels of government, except as required 

by law. 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 

This rule has been reviewed in 

accordance with the requirements of 

Executive Order 13175, ‘‘Consultation 

and Coordination with Indian Tribal 

Governments.’’ Executive Order 13175 

requires Federal agencies to consult and 

coordinate with tribes on a governmentto-government basis on policies that 

have tribal implications, including 

regulations, legislative comments or 

proposed legislation, and other policy 

statements or actions that have 

substantial direct effects on one or more 

Indian tribes, on the relationship 

between the Federal Government and 

Indian tribes or on the distribution of 

power and responsibilities between the 

Federal Government and Indian tribes. 

FSA has assessed the impact of this 

rule on Indian tribes and determined 

that this rule does not, to our 

knowledge, have tribal implications that 

require tribal consultation under 

Executive Order 13175. If a Tribe 

requests consultation, FSA will work 

with the USDA Office of Tribal 

Relations to ensure meaningful 

consultation is provided where changes, 

additions, and modifications identified 

in this rule are not expressly mandated 

by the 2014 Farm Bill. 

Unfunded Mandates 

Title II of the Unfunded Mandates 

Reform Act of 1995 (UMRA, Pub. L. 

104–4) requires Federal agencies to 

assess the effects of their regulatory 

actions on State, local, and Tribal 

governments, or the private sector. 

Agencies generally must prepare a 

written statement, including a cost 

benefit analysis, for proposed and final 

rule with Federal mandates that may 

result in expenditures of $100 million or 

more in any year for State, local, or 

Tribal governments, in the aggregate, or 


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Federal Register / Vol. 79, No. 195 / Wednesday, October 8, 2014 / Rules and Regulations 60743 

to the private sector. UMRA generally 

requires agencies to consider 

alternatives and adopt the more cost 

effective or least burdensome alternative 

that achieves the objectives of the rule. 

This rule contains no Federal mandates 

as defined in Title II of UMRA for State, 

local, and Tribal governments, or the 

private sector. Therefore, this rule is not 

subject to the requirements of sections 

202 and 205 of UMRA. 

SBREFA 

This rule is not a major rule under 

SBREFA (Pub. L. 104–121). Therefore, 

FSA is not required to delay the 

effective date for 60 days from the date 

of publication to allow for 

Congressional review. Accordingly, this 

rule is effective on the date of 

publication in the Federal Register. 

Federal Assistance Programs 

The title and number of the Federal 

Assistance Programs, as found in the 

Catalog of Federal Domestic Assistance, 

to which this rule applies are: 

10.099 Conservation Loans; 

10.404 Emergency Loans; 

10.406 Farm Operating Loans; and 

10.407 Farm Ownership Loans. 

Paperwork Reduction Act 

The regulatory changes in this rule do 

not require changes to the information 

collection requests currently approved 

by OMB control numbers of 0560–0155, 

0560–0233, 0560–0236, 0560–0237, 

0560–0238, and 0560–0230. 

E-Government Act Compliance 

FSA 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 other purposes. 

List of Subjects 

7 CFR Part 761 

Accounting, Loan programs— 

agriculture, Rural areas. 

7 CFR Part 762 

Agriculture, Banks, Banking, Credit, 

Loan programs—agriculture. 

7 CFR Part 763 

Agriculture, Banks, Banking, Credit, 

Loan programs—agriculture. 

7 CFR Part 764 

Agriculture, Credit, Loan programs— 

agriculture. 

7 CFR Part 765 

Agriculture, Agricultural 

commodities, Credit, Livestock, Loan 

programs—agriculture. 

For the reasons discussed above, FSA 

amends 7 CFR chapter VII as follows: 

PART 761—FARM LOAN PROGRAM; 

GENERAL PROGRAM 

ADMINISTRATION 

■ 1. The authority citation for part 761 

continues to read as follows: 

Authority: 5 U.S.C. 301 and 7 U.S.C. 1989. 

Subpart A—General Provisions 

■ 2. Amend § 761.2(b) as follows. 

■ a. Add the definitions of ‘‘Embedded 

entity’’ and ‘‘Entity member’’ in 

alphabetical order; 

■ b. Revise the definition of ‘‘Entity’’; 

■ c. In the definition of ‘‘Established 

farmer,’’ revise the introductory text and 

paragraphs (4) and (5) and add 

paragraph (6); 

■ d. In the definition of ‘‘Family farm’’ 

in the introductory text, remove the 

word ‘‘farm’’ and add with the word 

‘‘business operation’’ in its place; 

■ e. In the definition of ‘‘Operator’’ add 

a sentence at the end; and 

■ f. In the definition of ‘‘Participated in 

the business operations of a farm’’ in 

paragraph (3), add the parenthetical 

phrase ‘‘(which can include a farmrelated apprenticeship, internship, or 

similar educational program with 

applied work experience)’’ immediately 

following the words ‘‘worked on a 

farm’’. 

The additions and revisions read as 

follows: 

§ 761.2 Abbreviations and definitions. 

* * * * * 

(b) * * * 

Embedded entity means an entity that 

has a direct or indirect interest, as a 

stockholder, member, beneficiary, or 

otherwise, in another entity. 

* * * * * 

Entity means a corporation, 

partnership, joint operation, 

cooperative, limited liability company, 

trust, or other legal business 

organization, as determined by the 

Agency, that is authorized to conduct 

business in the state in which the 

organization operates. Organizations 

operating as non-profit entities under 

Internal Revenue Code 501 (26 U.S.C. 

501) and estates are not considered 

eligible entities for Farm Loan Programs 

purposes. 

Entity member means all individuals 

and all embedded entities, as well as the 

individual members of the embedded 

entities, having an ownership interest in 

the assets of the entity. 

* * * * * 

Established farmer means a farmer 

who operates the farm (in the case of an 

entity, its members as a group) who 

meets all of the following conditions: 

* * * * * 

(4) In the case of an entity, is 

primarily engaged in farming and has 

over 50 percent of its gross income from 

all sources from its farming operation 

based on the operation’s projected cash 

flow for the next crop year or the next 

12-month period, as mutually 

determined; 

(5) Is not an integrated livestock, 

poultry, or fish processor who operates 

primarily and directly as a commercial 

business through contracts or business 

arrangements with farmers, except a 

grower under contract with an integrator 

or processor may be considered an 

established farmer, provided the 

farming operation is not managed by an 

outside full-time manager or 

management service and Agency loans 

will be based on the applicant’s share of 

the agricultural production as specified 

in the contract; and 

(6) Does not employ a full time farm 

manager. 

* * * * * 

Operator. * * * Operating-only 

entities may be considered owneroperators when the individuals who 

own the farm real estate own at least 50 

percent of the family farm operation. 

* * * * * 

PART 762—GUARANTEED FARM 

LOANS 

■ 3. The authority citation for part 762 

continues to read as follows: 

Authority: 5 U.S.C. 301 and 7 U.S.C. 1989. 

■ 4. Amend § 762.120 as follows: 

■ a. Revise paragraphs (j)(1) and (j)(2)(i) 

through (iii); 

■ b. Add paragraphs (j)(3) and (4); and 

■ c. Revise paragraphs (k)(4) and (1)(3). 

The additions and revisions read as 

follows. 

§ 762.120 Applicant eligibility. 

* * * * * 

(j) * * * 

(1) The individual must be the 

operator of not larger than a family farm 

and the owner of a farm after the loan 

is closed. Ownership of the family farm 

operation or the farm real estate may be 

held either directly in the individual’s 

name or indirectly through interest in a 

legal entity. 

(2) * * * 

(i) An ownership entity must be 

authorized to own a farm in the state or 

states in which the farm is located. An 

operating entity must be authorized to 

operate a farm in the state or states in 

which the farm is located; and 

(ii) If the entity members holding a 

majority interest are related by marriage 


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60744 Federal Register / Vol. 79, No. 195 / Wednesday, October 8, 2014 / Rules and Regulations 

or blood, at least one member of the 

entity must operate the family farm and 

at least one member of the entity or the 

entity must own the farm; or 

(iii) If the entity members holding a 

majority interest are not related by 

marriage or blood, the entity members 

holding a majority interest must operate 

the family farm and the entity members 

holding a majority interest or the entity 

must own the farm. 

(3) If the entity is an operator-only 

entity, the individuals that own the farm 

(real estate) must own at least 50 

percent of the family farm (operating 

entity). 

(4) All ownership may be held either 

directly in the individual’s name or 

indirectly through interest in a legal 

entity. 

(k) * * * 

(4) If the applicant has one or more 

embedded entities, at least 75 percent of 

the individual ownership interests of 

each embedded entity must be owned 

by members actively involved in 

managing or operating the family farm. 

(l) * * * 

(3) If the applicant has one or more 

embedded entities, at least 75 percent of 

the individual ownership interests of 

each embedded entity must be owned 

by members actively involved in 

managing or operating the family farm; 

and 

* * * * * 

■ 5. Revise § 762.130(e)(4) to read as 

follows: 

§ 762.130 Loan approval and issuing the 

guarantee. 

* * * * * 

(e) * * * 

(4) The note is executed by the 

individual liable for the loan. For entity 

applicants, the promissory note will be 

executed to evidence the liability of the 

entity, any embedded entities, and the 

individual liability of all entity 

members. Individual liability can be 

waived by the Agency for members 

holding less than 10 percent ownership 

in the entity if the collectability of the 

loan will not be impaired; and 

* * * * * 

PART 763—LAND CONTRACT 

GUARANTEE PROGRAM 

■ 6. The authority citation for part 763 

continues to read as follows: 

Authority: 5 U.S.C. 501 and 7 U.S.C. 1989. 

■ 7. Amend § 763.5(b) as follows: 

■ a. Revise paragraphs (b)(2) 

introductory text and (b)(2)(ii) and (iii); 

■ b. In paragraphs (b)(2)(iv)(A) and 

(b)(2)(v)(A), add the word ‘‘family’’ 

immediately before the word ‘‘farm’’; 

■ c. Add paragraphs (b)(2)(vi) and (vii); 

and 

■ d. Revise paragraph (b)(3). 

The revisions and additions read as 

follows. 

§ 763.5 Eligibility. 

* * * * * 

(b) * * * 

(2) Is the owner and operator of a 

family farm after the Contract is 

completed. Ownership of the family 

farm operation or the farm real estate 

may be held either directly in the 

individual’s name or indirectly through 

interest in a legal entity. In the case of 

an entity buyer: 

* * * * * 

(ii) If the applicant has one or more 

embedded entities, at least 75 percent of 

the individual ownership interests of 

each embedded entity must be owned 

by members actively involved in 

managing or operating the family farm. 

(iii) An ownership entity must be 

authorized to own a farm in the state or 

states in which the farm is located. An 

operating entity must be authorized to 

operate a farm in the state or states in 

which the farm is located. 

* * * * * 

(vi) If the entity is an operator-only 

entity, the individuals that own the farm 

(real estate) must own at least 50 

percent of the family farm (operating 

entity). 

(vii) All ownership may be held either 

directly in the individual’s name or 

indirectly through interest in a legal 

entity. 

(3) Must have participated in the 

business operations of a farm or ranch 

for at least 3 years out of the last 10 

years prior to the date the application is 

submitted. Of those 3 years, 1 year can 

be substituted with the following 

experience: 

(i) Postsecondary education in 

agriculture business, horticulture, 

animal science, agronomy, or other 

agricultural related fields, 

(ii) Significant business management 

experience, or 

(iii) Leadership or management 

experience while serving in any branch 

of the military. 

* * * * * 

§ 763.7 [Amended] 

■ 9. In § 763.7(b)(3)(ii), remove the word 

‘‘personal’’. 

PART 764—DIRECT LOAN MAKING 

■ 10. The authority citation for part 764 

continues to read as follows: 

Authority: 5 U.S.C. 301 and 7 U.S.C. 1989. 

§ 764.51 [Amended] 

■ 11. Amend § 764.51 as follows: 

■ a. In paragraph (b)(2)(ii) remove the 

word ‘‘personal’’; 

■ b. In paragraph (c)(1)(ii), remove 

‘‘$35,000’’ both times it appears and add 

‘‘$50,000’’ in its place. 

■ 12. Revise § 764.101(1) to read as 

follows: 

§ 764.101 General eligibility requirements. 

* * * * * 

(1) Entity composition. If the 

applicant has one or more embedded 

entities, at least 75 percent of the 

individual ownnership interests of each 

embedded entity must be owned by 

members actively involved in managing 

or operating the family farm. 

■ 13. Amend § 764.152 as follows: 

■ a. Revise paragraphs (c) introductory 

text and (c)(2) and (3); 

■ b. Add paragraph (c)(4); and 

■ c. In paragraph (d), add a sentence at 

the end; and 

■ d. Add paragraphs (d)(1) through (3). 

The revisions and additions read as 

follows. 

§ 764.152 Eligibility requirements 

* * * * * 

(c) Must be the owner-operator of the 

farm financed with Agency funds after 

the loan is closed. Ownership of the 

family farm operation and farm real 

estate may be held either directly in the 

individual’s name or indirectly through 

interest in a legal entity. In the case of 

an entity: 

* * * * * 

(2) An ownership entity must be 

authorized to own a farm in the state or 

states in which the farm is located. An 

operating entity must be authorized to 

operate a farm in the state or states in 

which the farm is located. 

(3) If the entity members holding 

majority interest are: 

(i) Related by blood or marriage, at 

least one member of the entity must 

operate the family farm and at least one 

member of the entity or the entity must 

own the farm; or, 

(ii) Not related by blood or marriage, 

the entity members holding a majority 

interest must operate the family farm 

and the entity members holding a 

majority interest or the entity must own 

the farm. 

(4) If the entity is an operator only 

entity, the individuals that own the farm 

(real estate) must own at least 50 

percent of the family farm (operating 

entity). 

(d) * * * One of these three years can 

be substituted with the following 

experience: 

(1) Postsecondary education in 

agriculture business, horticulture, 


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Federal Register / Vol. 79, No. 195 / Wednesday, October 8, 2014 / Rules and Regulations 60745 

animal science, agronomy, or other 

agricultural related fields, 

(2) Significant business management 

experience, or 

(3) Leadership or management 

experience while serving in any branch 

of the military. 

* * * * * 

■ 14. Revise § 764.402(a)(2) to read as 

follows: 

§ 764.402 Loan closing. 

* * * * * 

(a) * * * 

(2) For entity applicants, the 

promissory note will be executed to 

evidence the liability of the entity, any 

embedded entities, and the individual 

liability of all entity members. 

* * * * * 

PART 765—DIRECT LOAN 

SERVICING—REGULAR 

■ 15. The authority citation for part 765 

continues to read as follows: 

Authority: 5 U.S.C. 301 and 7 U.S.C. 1989. 

Subpart I—Transfer of Security and 

Assumption of Debt 

§ 765.401 [Amended] 

■ 16. Amend § 765.401(a)(2), second 

sentence, by adding the word ‘‘entity’’ 

immediately before the word ‘‘member’’. 

■ 17. Amend § 765.402(e) as follows: 

■ a. In paragraph (e)(1) remove the 

words ‘‘that is’’ and add the words ‘‘in 

which the entity members are’’ in their 

place; 

■ b. In paragraph (e)(2) remove the 

words ‘‘original members’’ and add the 

words ‘‘original entity members’’ in 

their place; 

■ c. Revise paragraphs (e)(3) 

introductory text and (e)(3)(i); 

■ d. In paragraph (e)(3)(ii), second 

sentence, add the word ‘‘entity’’ 

immediately before the word 

‘‘members’’. 

The revisions read as follows. 

§ 765.402 Transfer of security and loan 

assumption on same rates and terms. 

* * * * * 

(e) * * * 

(3) A corporation, limited liability 

company, cooperative, or other legal 

business organization, the transferee 

must: 

(i) Have been a corporate stockholder, 

cooperative member or other member of 

a legal business organization, when the 

Agency made the original loan or will 

be an entity comprised solely of entity 

members who were entity members 

when the entity received the loan; and 

* * * * * 

Signed on September 30, 2014. 

Val Dolcini, 

Administrator, Farm Service Agency. 

[FR Doc. 2014–24046 Filed 10–7–14; 8:45 am] 

BILLING CODE 3410–05–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Part 165 

[Docket Number USCG–2014–0214] 

RIN 1625–AA11 

Regulated Navigation Area; South 

Bristol Gut Bridge Replacement, South 

Bristol, ME 

AGENCY: Coast Guard, DHS. 

ACTION: Temporary final rule. 

SUMMARY: The Coast Guard is 

establishing a regulated navigation area 

(RNA) on the navigable waters of The 

Gut in South Bristol, ME in support of 

bridge construction. This regulated 

navigation area allows the Coast Guard 

to enforce speed and wake restrictions 

and prohibit all vessel traffic through 

the regulated navigation area during 

bridge replacement operations, both 

planned and unforeseen, which could 

pose an imminent hazard to persons and 

vessels operating in the area. This rule 

is necessary to provide for the safety of 

life on the navigable waters during 

bridge structural repair operations. 

DATES: This rule is effective without 

actual notice from October 8, 2014 until 

April 30, 2017. For the purposes of 

enforcement, actual notice will be used 

from the date the rule was signed, 

September 19, 2014, until October 8, 

2014. 

ADDRESSES: Documents mentioned in 

this preamble as being available in the 

docket, are part of docket [USCG–2014– 

0214]. To view documents mentioned in 

this preamble, go to http://

www.regulations.gov, type the docket 

number in the ‘‘SEARCH’’ box, and 

click ‘‘SEARCH.’’ Click on ‘‘OPEN 

DOCKET FOLDER’’ on the line 

associated with this rulemaking. You 

may also visit the Docket Management 

Facility in Room W12–140 on the 

ground floor of the Department of 

Transportation West Building, 1200 

New Jersey Avenue SE., Washington, 

DC 20590, between 9 a.m. and 5 p.m., 

Monday through Friday, except Federal 

holidays. 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this rule, call 

Chief Craig D. Lapiejko, Waterways 

Management at Coast Guard First 

District, at (617) 223–8385 or email at 

Craig.D.Lapiejko@uscg.mil; or 

Lieutenant Junior Grade David B. 

Bourbeau, Waterways Management 

Division Chief at Coast Guard Sector 

Northern New England, at (207) 347– 

5015 or email at David.T.Bourbeau@

uscg.mil. If you have questions on 

viewing or submitting material to the 

docket, call Cheryl Collins, Program 

Manager, Docket Operations, at (202) 

366–9826. 

SUPPLEMENTARY INFORMATION: 

Table of Acronyms 

DHS Department of Homeland Security 

FR Federal Register 

A. Regulatory History and Information 

On January 24, 2014, Sector Northern 

New England received notice of a 

proposed replacement of The Gut Bridge 

in South Bristol, ME between 

Rutherford Island and Bristol Neck. A 

Bridge Permit was awarded to Maine 

Department of Transportation (MEDOT) 

on April 15, 2014 to begin in accordance 

with Plans dated September 24, 2013. 

MEDOT held seven public meetings 

between June 2009 and August 2013 

and mariners have expressed no 

significant concerns. 

On November 8, 2013, Public Notice 

1–132 was disseminated by the First 

Coast Guard District. This notice 

included the official plans being 

submitted for approval of a bridge 

permit and solicited comments from the 

public. Twenty-five comments were 

received. All comments were in support 

of burying the existing overhead 

electrical cables rather than allowing 

them to remain in place above the 

water. There were no comments 

received in opposition of the proposed 

construction project or potential 

closures to the channel. 

On July 25, 2014, the Coast Guard 

published a notice of proposed 

rulemaking (NPRM) regarding the 

creation of this regulated navigation 

area. No comments were received 

during the public comment period of 

the NPRM. 

Under 5 U.S.C. 553(d)(3), the Coast 

Guard finds that good cause exists for 

making this rule effective less than 30 

days after publication in the Federal 

Register. Delaying the effectiveness of 

this rule would be impracticable and 

contrary to the public interest as 

immediate action is needed to protect 

the boating public from the hazards 

associated with a dangerous 

construction site. The Coast Guard finds 

it impractical and unnecessary to move 

the start of construction to 


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