I
105TH CONGRESS
2D SESSION
H. R. 4246
To improve the provision of agricultural credit to farmers and ranchers
under the Consolidated Farm and Rural Development Act.
IN THE HOUSE OF REPRESENTATIVES
JULY 16, 1998
Mr. COMBEST (for himself, Mr. DOOLEY of California, Mr. SMITH of Oregon,
Mr. STENHOLM, Mr. BARRETT of Nebraska, Mrs. CLAYTON, Mr. POMBO,
Mr. MINGE, Mr. EVERETT, Mr. BISHOP, Mr. LEWIS of Kentucky, Mr.
THOMPSON, Mr. CHAMBLISS, Mr. BALDACCI, Mr. LAHOOD, Ms.
STABENOW, Mrs. EMERSON, Mr. ETHERIDGE, Mr. MORAN of Kansas,
Mr. JOHN, Mr. PICKERING, Mr. THUNE, and Mr. JENKINS) introduced
the following bill; which was referred to the Committee on Agriculture
A BILL
To improve the provision of agricultural credit to farmers
and ranchers under the Consolidated Farm and Rural
Development Act.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Agricultural Credit Im-
provement Act of 1998’’.
SEC. 2. PROHIBITION OF LOAN GUARANTEES TO BORROW-
ERS WHO HAVE RECEIVED DEBT FORGIVE-
NESS AFTER APRIL 4, 1996.
(a) IN GENERAL.—Section 373(b)(1) of the Consoli-
dated Farm and Rural Development Act (7 U.S.C.
2008h(b)(1)) is amended to read as follows:
‘‘(1) PROHIBITIONS.—Except as provided in
paragraph (2):
‘‘(A) LOAN PROHIBITION.—The Secretary
may not make a loan under this title to a bor-
rower who has received debt forgiveness on a
loan made or guaranteed under this title.
‘‘(B) GUARANTEES PROHIBITED FOR BOR-
ROWER
WHO
HAS
RECEIVED
DEBT
FORGIVE-
NESS AFTER APRIL 4, 1996.—The Secretary may
not guarantee a loan under this title to a bor-
rower who has received debt forgiveness after
April 4, 1996, on a loan made or guaranteed
under this title.’’.
(b) AUTHORITY TO MAKE EMERGENCY LOANS TO
CERTAIN BORROWERS WHO HAVE RECEIVED DEBT FOR-
GIVENESS.—Section 373(b)(2) of such Act (7 U.S.C.
2008h(b)(2)) is amended—
(1) by inserting ‘‘(A)’’ before ‘‘The’’; and
(2) by adding at the end the following:
‘‘(B) The Secretary may make an emergency
loan under section 321 to a borrower who—
‘‘(i) on or before April 4, 1996, received
not more than 1 debt forgiveness on a loan
made or guaranteed under this title; and
‘‘(ii) after April 4, 1996, has not received
debt forgiveness on a loan made or guaranteed
under this title.’’.
SEC. 3. FAMILY FARM DEFINITION.
(a) REAL ESTATE LOANS.—Section 302 of the Con-
solidated Farm and Rural Development Act (7 U.S.C.
1922) is amended by adding at the end the following:
‘‘(c)(1) The primary factor to be considered in deter-
mining whether an applicant for a loan under this subtitle
is engaged primarily and directly in farming or ranching
shall be whether the applicant is participating in routine,
ongoing farm activities, and in overall decision making
with regard to the farm or ranch.
‘‘(2) The Secretary may not deny a loan under this
subtitle solely because 2 or more individuals are employed
full-time in the farming operation for which the loan is
sought.’’.
(b) OPERATING LOANS.—Section 311 of such Act (7
U.S.C. 1941) is amended by adding at the end the follow-
ing:
‘‘(d)(1) The primary factor to be considered in deter-
mining whether an applicant for a loan under this subtitle
is engaged primarily and directly in farming or ranching
shall be whether the applicant is participating in routine,
ongoing farm activities, and in overall decision making
with regard to the farm or ranch.
‘‘(2) The Secretary may not deny a loan under this
subtitle solely because 2 or more individuals are employed
full-time in the farming operation for which the loan is
sought.’’.
(c) EMERGENCY LOANS.—Section 321 of such Act (7
U.S.C. 1961) is amended by adding at the end the follow-
ing:
‘‘(e)(1) The primary factor to be considered in deter-
mining whether an applicant for a loan under this subtitle
is engaged primarily and directly in farming or ranching
shall be whether the applicant is participating in routine,
ongoing farm activities, and in overall decision making
with regard to the farm or ranch.
‘‘(2) The Secretary may not deny a loan under this
subtitle solely because 2 or more individuals are employed
full-time in the farming operation for which the loan is
sought.’’.
SEC. 4. COMBINED LIMIT ON AMOUNT OF GUARANTEED
FARM OWNERSHIP LOANS AND GUARANTEED
FARM OPERATING LOANS; INDEXATION TO
INFLATION.
(a) LIMIT ON AMOUNT OF GUARANTEED FARM OWN-
ERSHIP LOANS.—Section 305 of the Consolidated Farm
and Rural Development Act (7 U.S.C. 1925) is amend-
ed—
(1) by striking ‘‘$300,000’’ and inserting
‘‘$700,000 (increased, beginning with fiscal year
1998, by the inflation percentage applicable to the
fiscal year in which the loan is to be made or in-
sured), reduced by the unpaid indebtedness of the
borrower on loans under subtitle B that are guaran-
teed by the Secretary’’; and
(2) by adding at the end the following: ‘‘For
purposes of this section, the inflation percentage ap-
plicable to a fiscal year is the percentage (if any) by
which (A) the average of the Consumer Price Index
(as defined in section 1(f)(5) of the Internal Reve-
nue Code of 1986) for the 12-month period ending
on August 31 of the immediately preceding fiscal
year, exceeds (B) the average of the Consumer Price
Index (as so defined) for the 12-month period end-
ing on August 31, 1996.’’.
(b) LIMIT ON AMOUNT OF GUARANTEED FARM OP-
ERATING LOANS.—Section 313 of such Act (7 U.S.C.
1943) is amended—
(1) by striking ‘‘$400,000’’ and inserting
‘‘$700,000 (increased, beginning with fiscal year
1998, by the inflation percentage applicable to the
fiscal year in which the loan is to be made or in-
sured), reduced by the unpaid indebtedness of the
borrower on loans under the sections specified in
section 305 that are guaranteed by the Secretary’’;
and
(2) by adding at the end the following: ‘‘For
purposes of this section, the inflation percentage ap-
plicable to a fiscal year is the percentage (if any) by
which (A) the average of the Consumer Price Index
(as defined in section 1(f)(5) of the Internal Reve-
nue Code of 1986) for the 12-month period ending
on August 31 of the immediately preceding fiscal
year, exceeds (B) the average of the Consumer Price
Index (as so defined) for the 12-month period end-
ing on August 31, 1996.’’.
SEC. 5. EXPANSION OF CLASS OF BEGINNING FARMERS EL-
IGIBLE FOR DIRECT OPERATING LOANS.
Section 311(c)(1)(A) of the Consolidated Farm and
Rural Development Act (7 U.S.C. 1941(c)(1)(A)) is
amended by striking ‘‘who has not operated a farm or
ranch, or who has operated a farm or ranch for not more
than 5 years’’.
SEC. 6. PRIORITY FOR FARMER-OWNED VALUE-ADDED
PROCESSING FACILITIES.
Section 310B of the Consolidated Farm and Rural
Development Act (7 U.S.C. 1932) is amended by adding
at the end the following new subsection:
‘‘(h) PRIORITY FOR FARMER-OWNED VALUE-ADDED
PROCESSING FACILITIES.—In approving applications for
loans and grants authorized under this section, section
306(a)(11), and other applicable provisions of this title (as
determined by the Secretary), the Secretary shall give a
high priority to applications for projects that encourage
farmer-owned value-added processing facilities.’’.
SEC. 7. NOTICE OF RECAPTURE UNDER SHARED APPRECIA-
TION ARRANGEMENTS.
Section 353(e) of the Consolidated Farm and Rural
Development Act (7 U.S.C. 2001(e)) is amended by add-
ing at the end the following:
‘‘(6) NOTICE OF RECAPTURE.—Not later than
12 months before the end of the term of a shared
appreciation arrangement, the Secretary shall notify
the borrower involved of the provisions of the ar-
rangement.’’.
SEC. 8. NATIONAL REALLOCATION OF FUNDS FOR USE BY
SOCIALLY DISADVANTAGED FARMERS AND
RANCHERS.
Section 355(c)(2) of the Consolidated Farm and
Rural Development Act (7 U.S.C. 2003(c)(2)) is amended
to read as follows:
‘‘(2) RESERVATION AND ALLOCATION.—
‘‘(A) IN GENERAL.—The Secretary shall,
to the greatest extent practicable, reserve and
allocate the proportion of each State’s loan
funds made available under subtitle B that is
equal to that State’s target participation rate
for use by the socially disadvantaged farmers or
ranchers in that State. The Secretary shall, to
the extent practicable, distribute the total so
derived on a county by county basis according
to the number of socially disadvantaged farmers
or ranchers in the county.
‘‘(B) 
REALLOCATION
OF
UNUSED
FUNDS.—The Secretary may pool any funds re-
served and allocated under this paragraph with
respect to a State that are not used as de-
scribed in subparagraph (A) in a State in the
first 6 months of a fiscal year with the funds
similarly not so used in other States, and may
reallocate such pooled funds in the discretion of
the Secretary for use by socially disadvantaged
farmers and ranchers in other States.’’.
SEC. 9. APPLICABILITY OF DISASTER LOAN COLLATERAL
REQUIREMENTS UNDER THE SMALL BUSI-
NESS ACT.
Section 324(d) of the Consolidated Farm and Rural
Development Act (7 U.S.C. 1964(d)) is amended by add-
ing at the end the following: ‘‘The Secretary shall not deny
a loan under this subtitle to a borrower by reason of the
fact that the borrower lacks a particular amount of collat-
eral for the loan if it is reasonably certain that the bor-
rower will be able to repay the loan. Notwithstanding the
preceding sentence, if a borrower refuses to pledge avail-
able collateral on request by the Secretary, the Secretary
may deny or cancel a loan under this subtitle.’’.
SEC. 10. GROWER-SHIPPER AGREEMENTS.
(a) REAL ESTATE LOANS.—Section 302 of the Con-
solidated Farm and Rural Development Act (7 U.S.C.
1922) is further amended by adding at the end the follow-
ing:
‘‘(d) This section shall not be construed to prohibit
the Secretary from making a loan under this subtitle to
an applicant therefor who has entered into an agreement
with a shipper of perishable commodities under which the
applicant and the shipper share in the proceeds from the
sale of an agricultural commodity if—
‘‘(1) in the absence of such an agreement, the
applicant could not easily market the agricultural
commodity, or could not market the agricultural
commodity without incurring significant additional
risk; and
‘‘(2) the agreement is clearly beneficial to the
applicant.’’.
(b) OPERATING LOANS.—Section 311 of such Act (7
U.S.C. 1941) is further amended by adding at the end
the following:
‘‘(e) This section shall not be construed to prohibit
the Secretary from making a loan under this subtitle to
an applicant therefor who has entered into an agreement
with a shipper of perishable commodities under which the
applicant and the shipper share in the proceeds from the
sale of an agricultural commodity if—
‘‘(1) in the absence of such an agreement, the
applicant could not easily market the agricultural
commodity, or could not market the agricultural
commodity without incurring significant additional
risk; and
‘‘(2) the agreement is clearly beneficial to the
applicant.’’.
(c) EMERGENCY LOANS.—Section 321 of such Act (7
U.S.C. 1961) is further amended by adding at the end
the following:
‘‘(f) This section shall not be construed to prohibit
the Secretary from making a loan under this subtitle to
an applicant therefor who has entered into an agreement
with a shipper of perishable commodities under which the
applicant and the shipper share in the proceeds from the
sale of an agricultural commodity if—
‘‘(1) in the absence of such an agreement, the
applicant could not easily market the agricultural
commodity, or could not market the agricultural
commodity without incurring significant additional
risk; and
‘‘(2) the agreement is clearly beneficial to the
applicant.’’.
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