§1308. Payment limitations
(a) Definitions
In this section through section 1308–5 of this title:
(1) Covered commodity
The term “covered commodity” has the meaning given that term in section 1111 of the Agricultural Act of 2014 (7 U.S.C. 9011).
(2) Family member
The term “family member” means a person to whom a member in the farming operation is related as lineal ancestor, lineal descendant, sibling, first cousin, niece, nephew, spouse, or otherwise by marriage.
(3) Legal entity
The term “legal entity” means an entity that is created under Federal or State law and that-
(A) owns land or an agricultural commodity; or
(B) produces an agricultural commodity.
(4) Person
The term “person” means a natural person, and does not include a legal entity.
(5) Qualified pass-through entity
The term “qualified pass-through entity” means-
(A) a partnership (within the meaning of subchapter K of chapter 1 of the Internal Revenue Code of 1986 [26 U.S.C. 701 et seq.]);
(B) an S corporation (as defined in section 1361 of that Code);
(C) a limited liability company that does not affirmatively elect to be treated as a corporation; and
(D) a joint venture or general partnership.
(6) Secretary
The term “Secretary” means the Secretary of Agriculture.
(b) Limitation on payments for covered commodities (other than peanuts)
Subject to subsection (i), the total amount of payments received, directly or indirectly, by a person or legal entity (except a qualified pass-through entity) for any crop year under sections 1116 and 1117 of the Agricultural Act of 2014 (7 U.S.C. 9016, 9017) (other than for peanuts) may not exceed $155,000.
(c) Limitation on payments for peanuts
Subject to subsection (i), the total amount of payments received, directly or indirectly, by a person or legal entity (except a qualified pass-through entity) for any crop year under sections 1116 and 1117 of the Agricultural Act of 2014 (7 U.S.C. 9016, 9017) for peanuts may not exceed $155,000.
(d) Limitation on applicability
Nothing in this section authorizes any limitation on any benefit associated with the forfeiture of a commodity pledged as collateral for a loan made available under title I of the Agricultural Act of 2014 [7 U.S.C. 9001 et seq.].
(e) Attribution of payments
(1) In general
In implementing subsections (b) and (c) and a program described in paragraphs (1)(C) and (2)(B) of section 1308–3a(b) 1 of this title, the Secretary shall issue such regulations as are necessary to ensure that the total amount of payments are attributed to a person by taking into account the direct and indirect ownership interests of the person in a legal entity that is eligible to receive the payments.
(2) Payments to a person
Each payment made directly to a person shall be combined with the pro rata interest of the person in payments received by a legal entity in which the person has a direct or indirect ownership interest unless the payments of the legal entity have been reduced by the pro rata share of the person.
(3) Payments to a legal entity
(A) In general
Each payment made to a legal entity shall be attributed to those persons who have a direct or indirect ownership interest in the legal entity unless the payment to the legal entity has been reduced by the pro rata share of the person.
(B) Attribution of payments
(i) Payment limits
Except as provided in clause (ii), payments made to a legal entity shall not exceed the amounts specified in subsections (b) and (c).
(ii) Exception for qualified pass-through entities
Payments made to a qualified pass-through entity shall not exceed, for each payment specified in subsections (b) and (c), the amount determined by multiplying the maximum payment amount specified in subsections (b) and (c) by the number of persons and legal entities (other than qualified pass-through entities) that comprise the ownership of the qualified pass-through entity.
(iii) Reduction
Payments made to a legal entity shall be reduced proportionately by an amount that represents the direct or indirect ownership in the legal entity by any person or legal entity that has otherwise exceeded the applicable maximum payment limitation.
(4) 4 levels of attribution for embedded legal entities
(A) In general
Attribution of payments made to legal entities shall be traced through 4 levels of ownership in legal entities.
(B) First level
Any payments made to a legal entity (a first-tier legal entity) that is owned in whole or in part by a person shall be attributed to the person in an amount that represents the direct ownership in the first-tier legal entity by the person.
(C) Second level
(i) In general
Any payments made to a first-tier legal entity that is owned (in whole or in part) by another legal entity (a second-tier legal entity) shall be attributed to the second-tier legal entity in proportion to the ownership of the second-tier legal entity in the first-tier legal entity.
(ii) Ownership by a person
If the second-tier legal entity is owned (in whole or in part) by a person, the amount of the payment made to the first-tier legal entity shall be attributed to the person in the amount that represents the indirect ownership in the first-tier legal entity by the person.
(D) Third and fourth levels
(i) In general
Except as provided in clause (ii), the Secretary shall attribute payments at the third and fourth tiers of ownership in the same manner as specified in subparagraph (C).
(ii) Fourth-tier ownership
If the fourth-tier of ownership is that of a fourth-tier legal entity and not that of a person, the Secretary shall reduce the amount of the payment to be made to the first-tier legal entity in the amount that represents the indirect ownership in the first-tier legal entity by the fourth-tier legal entity.
(f) Special rules
(1) Minor children
(A) In general
Except as provided in subparagraph (B), payments received by a child under the age of 18 shall be attributed to the parents of the child.
(B) Regulations
The Secretary shall issue regulations specifying the conditions under which payments received by a child under the age of 18 will not be attributed to the parents of the child.
(2) Marketing cooperatives
Subsections (b) and (c) shall not apply to a cooperative association of producers with respect to commodities produced by the members of the association that are marketed by the association on behalf of the members of the association but shall apply to the producers as persons.
(3) Trusts and estates
(A) In general
With respect to irrevocable trusts and estates, the Secretary shall administer this section through section 1308–5 of this title in such manner as the Secretary determines will ensure the fair and equitable treatment of the beneficiaries of the trusts and estates.
(B) Irrevocable trust
(i) In general
In order for a trust to be considered an irrevocable trust, the terms of the trust agreement shall not-
(I) allow for modification or termination of the trust by the grantor;
(II) allow for the grantor to have any future, contingent, or remainder interest in the corpus of the trust; or
(III) except as provided in clause (ii), provide for the transfer of the corpus of the trust to the remainder beneficiary in less than 20 years beginning on the date the trust is established.
(ii) Exception
Clause (i)(III) shall not apply in a case in which the transfer is-
(I) contingent on the remainder beneficiary achieving at least the age of majority; or
(II) contingent on the death of the grantor or income beneficiary.
(C) Revocable trust
For the purposes of this section through section 1308–5 of this title, a revocable trust shall be considered to be the same person as the grantor of the trust.
(4) Cash rent tenants
(A) Definition
In this paragraph, the term “cash rent tenant” means a person or legal entity that rents land-
(i) for cash; or
(ii) for a crop share guaranteed as to the amount of the commodity to be paid in rent.
(B) Restriction
A cash rent tenant who makes a significant contribution of active personal management, but not of personal labor, with respect to a farming operation shall be eligible to receive a payment described in subsection (b) or (c) only if the tenant makes a significant contribution of equipment to the farming operation.
(5) Federal agencies
(A) In general
Notwithstanding subsection (d), a Federal agency shall not be eligible to receive any payment, benefit, or loan under title I of the Food, Conservation, and Energy Act of 2008 [7 U.S.C. 8701 et seq.], title I of the Agricultural Act of 2014 [7 U.S.C. 9001 et seq.], or title XII of this Act [16 U.S.C. 3801 et seq.].
(B) Land rental
A lessee of land owned by a Federal agency may receive a payment described in subsection (b), (c), or (d) if the lessee otherwise meets all applicable criteria.
(6) State and local governments
(A) In general
Notwithstanding subsection (d), except as provided in subsection (g), a State or local government, or political subdivision or agency of the government, shall not be eligible to receive any payment, benefit, or loan under title I of the Food, Conservation, and Energy Act of 2008 [7 U.S.C. 8701 et seq.], title I of the Agricultural Act of 2014 [7 U.S.C. 9001 et seq.], or title XII of this Act [16 U.S.C. 3801 et seq.].
(B) Tenants
A lessee of land owned by a State or local government, or political subdivision or agency of the government, may receive payments described in subsections (b), (c), and (d) if the lessee otherwise meets all applicable criteria.
(7) Changes in farming operations
(A) In general
In the administration of this section through section 1308–5 of this title, the Secretary may not approve any change in a farming operation that otherwise will increase the number of persons to which the limitations under this section are applied unless the Secretary determines that the change is bona fide and substantive.
(B) Family members
The addition of a family member to a farming operation under the criteria set out in section 1308–1 of this title shall be considered a bona fide and substantive change in the farming operation.
(8) Death of owner
(A) In general
If any ownership interest in land or a commodity is transferred as the result of the death of a program participant, the new owner of the land or commodity may, if the person is otherwise eligible to participate in the applicable program, succeed to the contract of the prior owner and receive payments subject to this section without regard to the amount of payments received by the new owner.
(B) Limitations on prior owner
Payments made under this paragraph shall not exceed the amount to which the previous owner was entitled to receive under the terms of the contract at the time of the death of the prior owner.
(9) Administration of reduction
The Secretary shall apply any order described in section 1614(d)(1) of the Agricultural Act of 2014 (7 U.S.C. 9097(d)(1)) to payments under sections 1116 and 1117 of that Act (7 U.S.C. 9016, 9017) prior to applying payment limitations under this section.
(g) Public schools
(1) In general
Notwithstanding subsection (f)(6)(A), a State or local government, or political subdivision or agency of the government, shall be eligible, subject to the limitation in paragraph (2), to receive a payment described in subsection (b) or (c) for land owned by the State or local government, or political subdivision or agency of the government, that is used to maintain a public school.
(2) Limitation
(A) In general
For each State, the total amount of payments described in subsections (b) and (c) that are received collectively by the State and local government and all political subdivisions or agencies of those governments shall not exceed $500,000.
(B) Exception
The limitation in subparagraph (A) shall not apply to States with a population of less than 1,500,000.
(h) Time limits; reliance
Regulations of the Secretary shall establish time limits for the various steps involved with notice, hearing, decision, and the appeals procedure in order to ensure expeditious handling and settlement of payment limitation disputes. Notwithstanding any other provision of law, actions taken by an individual or other entity in good faith on action or advice of an authorized representative of the Secretary may be accepted as meeting the requirement under this section or section 1308–1 of this title, to the extent the Secretary deems it desirable in order to provide fair and equitable treatment.
(i) Adjustment
For the 2025 crop year and each crop year thereafter, the Secretary shall annually adjust the amounts described in subsections (b) and (c) for inflation based on the Consumer Price Index for All Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor.
§1308–1. Notification of interests; payments limited to active farmers
(a) Notification of interests
To facilitate administration of section 1308 of this title and this section, each person or legal entity receiving payments described in subsections (b) and (c) of section 1308 of this title as a separate person or legal entity shall separately provide to the Secretary, at such times and in such manner as prescribed by the Secretary-
(1) the name and social security number of each person, or the name and taxpayer identification number of each legal entity, that holds or acquires an ownership interest in the separate person or legal entity; and
(2) the name and taxpayer identification number of each legal entity in which the person or legal entity holds an ownership interest.
(b) Actively engaged
(1) In general
To be eligible to receive a payment described in subsection (b) or (c) of section 1308 of this title, a person or legal entity shall be actively engaged in farming with respect to a farming operation as provided in this subsection or subsection (c).
(2) Classes actively engaged
Except as provided in subsections (c) and (d)-
(A) a person (including a person participating in a farming operation as a partner in a qualified pass-through entity, a grantor of a revocable trust, or a participant in a similar entity, as determined by the Secretary) shall be considered to be actively engaged in farming with respect to a farming operation if-
(i) the person makes a significant contribution (based on the total value of the farming operation) to the farming operation of-
(I) capital, equipment, or land; and
(II) personal labor or active personal management;
(ii) the person’s share of the profits or losses from the farming operation is commensurate with the contributions of the person to the farming operation; and
(iii) the contributions of the person are at risk;
(B) a legal entity that is a corporation, joint stock company, association, limited partnership, charitable organization, or other similar entity determined by the Secretary (including any such legal entity participating in the farming operation as a partner in a qualified pass-through entity, a grantor of a revocable trust, or as a participant in a similar legal entity as determined by the Secretary) shall be considered as actively engaged in farming with respect to a farming operation if-
(i) the legal entity separately makes a significant contribution (based on the total value of the farming operation) of capital, equipment, or land;
(ii) the stockholders or members collectively make a significant contribution of personal labor or active personal management to the operation; and
(iii) the standards provided in clauses (ii) and (iii) of subparagraph (A), as applied to the legal entity, are met by the legal entity;
(C) if a legal entity that is a qualified pass-through entity or a similar entity, as determined by the Secretary, separately makes a significant contribution (based on the total value of the farming operation involved) of capital, equipment, or land, and the standards provided in clauses (ii) and (iii) of subparagraph (A), as applied to the legal entity, are met by the legal entity, the partners or members making a significant contribution of personal labor or active personal management shall be considered to be actively engaged in farming with respect to the farming operation involved; and
(D) in making determinations under this subsection regarding equipment and personal labor, the Secretary shall take into consideration the equipment and personal labor normally and customarily provided by farm operators in the area involved to produce program crops.
(c) Special classes actively engaged
(1) Landowner
A person or legal entity that is a landowner contributing the owned land to a farming operation shall be considered to be actively engaged in farming with respect to the farming operation if-
(A) the landowner receives rent or income for the use of the land based on the production on the land or the operating results of the operation; and
(B) the person or legal entity meets the standards provided in clauses (ii) and (iii) of subsection (b)(2)(A).
(2) Adult family member
If a majority of the participants in a farming operation are family members, an adult family member shall be considered to be actively engaged in farming with respect to the farming operation if the person-
(A) makes a significant contribution, based on the total value of the farming operation, of active personal management or personal labor; and
(B) with respect to such contribution, meets the standards provided in clauses (ii) and (iii) of subsection (b)(2)(A).
(3) Sharecropper
A sharecropper who makes a significant contribution of personal labor to a farming operation shall be considered to be actively engaged in farming with respect to the farming operation if the contribution meets the standards provided in clauses (ii) and (iii) of subsection (b)(2)(A).
(4) Growers of hybrid seed
In determining whether a person or legal entity growing hybrid seed under contract shall be considered to be actively engaged in farming, the Secretary shall not take into consideration the existence of a hybrid seed contract.
(5) Custom farming services
(A) In general
A person or legal entity receiving custom farming services shall be considered separately eligible for payment limitation purposes if the person or legal entity is actively engaged in farming based on subsection (b)(2) or paragraphs (1) through (4) of this subsection.
(B) Prohibition
No other rules with respect to custom farming shall apply.
(6) Spouse
If 1 spouse (or estate of a deceased spouse) is determined to be actively engaged, the other spouse shall be determined to have met the requirements of subsection (b)(2)(A)(i)(II).
(d) Classes not actively engaged
(1) Cash rent landlord
A landlord contributing land to a farming operation shall not be considered to be actively engaged in farming with respect to the farming operation if the landlord receives cash rent, or a crop share guaranteed as to the amount of the commodity to be paid in rent, for the use of the land.
(2) Other persons and legal entities
Any other person or legal entity that the Secretary determines does not meet the standards described in subsections (b)(2) and (c) shall not be considered to be actively engaged in farming with respect to a farming operation.
§1308–2. Denial of program benefits
(a) 2-year denial of program benefits
A person or legal entity shall be ineligible to receive payments specified in subsections (b) and (c) of section 1308 of this title for the crop year, and the succeeding crop year, in which the Secretary determines that the person or legal entity-
(1) failed to comply with section 1308–1(b) of this title and adopted or participated in adopting a scheme or device to evade the application of section 1308, 1308–1, or 1308–3 of this title; or
(2) intentionally concealed the interest of the person or legal entity in any farm or legal entity engaged in farming.
(b) Extended ineligibility
If the Secretary determines that a person or legal entity, for the benefit of the person or legal entity or the benefit of any other person or legal entity, has knowingly engaged in, or aided in the creation of a fraudulent document, failed to disclose material information relevant to the administration of sections 1308 through 1308–5 of this title, or committed other equally serious actions (as identified in regulations issued by the Secretary), the Secretary may for a period not to exceed 5 crop years deny the issuance of payments to the person or legal entity.
(c) Pro rata denial
(1) In general
Payments otherwise owed to a person or legal entity described in subsections (a) or (b) shall be denied in a pro rata manner based on the ownership interest of the person or legal entity in a farm.
(2) Cash rent tenant
Payments otherwise payable to a person or legal entity shall be denied in a pro rata manner if the person or legal entity is a cash rent tenant on a farm owned or under the control of a person or legal entity with respect to which a determination has been made under subsection (a) or (b).
(d) Joint and several liability
Any legal entity (including qualified pass-through entities) and any member of any legal entity determined to have knowingly participated in a scheme or device to evade, or that has the purpose of evading, sections 1308, 1308–1, or 1308–3 of this title shall be jointly and severally liable for any amounts that are payable to the Secretary as the result of the scheme or device (including amounts necessary to recover those amounts).
(e) Release
The Secretary may partially or fully release from liability any person or legal entity who cooperates with the Secretary in enforcing sections 1308, 1308–1, and 1308–3 of this title, and this section.
§1308–3a. Adjusted gross income limitation
(a) Definitions
(1) Average adjusted gross income
In this section, the term “average adjusted gross income”, with respect to a person or legal entity, means the average of the adjusted gross income or comparable measure of the person or legal entity over the 3 taxable years preceding the most immediately preceding complete taxable year, as determined by the Secretary.
(2) Special rules for certain persons and legal entities
In the case of a legal entity that is not required to file a Federal income tax return or a person or legal entity that did not have taxable income in 1 or more of the taxable years used to determine the average under paragraph (1), the Secretary shall provide, by regulation, a method for determining the average adjusted gross income of the person or legal entity for purposes of this section.
(3) Allocation of income
On the request of any person filing a joint tax return, the Secretary shall provide for the allocation of average adjusted gross income among the persons filing the return if-
(A) the person provides a certified statement by a certified public accountant or attorney that specifies the method by which the average adjusted gross income would have been declared and reported had the persons filed 2 separate returns; and
(B) the Secretary determines that the method described in the statement is consistent with the information supporting the filed joint tax return.
(b) Limitations on commodity and conservation programs
(1) Limitation
Notwithstanding any other provision of law, subject to paragraphs (3) and (4), a person or legal entity shall not be eligible to receive any benefit described in paragraph (2) during a crop, fiscal, or program year, as appropriate, if the average adjusted gross income of the person or legal entity exceeds $900,000.
(2) Covered benefits
Paragraph (1) applies with respect to the following:
(A) A payment or benefit under subtitle A or E of title I of the Agricultural Act of 2014 [7 U.S.C. 9011 et seq., 9081].
(B) A marketing loan gain or loan deficiency payment under subtitle B of title I of the Agricultural Act of 2014 [7 U.S.C. 9031 et seq.].
(C) Starting with fiscal year 2015, a payment or benefit under title II of the Agriculture Improvement Act of 2018, title II of the Agricultural Act of 2014, title II of the Farm Security and Rural Investment Act of 2002, title II of the Food, Conservation, and Energy Act of 2008, or title XII of the Food Security Act of 1985 [16 U.S.C. 3801 et seq.].
(D) A payment or benefit under section 1524(b) of this title.
(E) A payment or benefit under section 7333 of this title.
(3) Waiver
The Secretary may waive the limitation established by paragraph (1) with respect to a payment pursuant to a covered benefit described in paragraph (2)(C), on a case-by-case basis, if the Secretary determines that environmentally sensitive land of special significance would be protected as a result of such waiver.
(4) Exception for certain operations
(A) Definitions
In this paragraph:
(i) Excepted payment or benefit
The term “excepted payment or benefit” means-
(I) a payment or benefit under subtitle E of title I of the Agricultural Act of 2014 (7 U.S.C. 9081 et seq.);
(II) a payment or benefit under section 7333 of this title; and
(III) a payment or benefit described in paragraph (2)(C) received on or after October 1, 2024.
(ii) Farming, ranching, or silviculture activities
The term “farming, ranching, or silviculture activities” includes agri-tourism, direct-to-consumer marketing of agricultural products, the sale of agricultural equipment owned by the person or legal entity, and other agriculture-related activities, as determined by the Secretary.
(B) Exception
In the case of an excepted payment or benefit, the limitation established by paragraph (1) shall not apply to a person or legal entity during a crop, fiscal, or program year, as appropriate, if greater than or equal to 75 percent of the average gross income of the person or legal entity derives from farming, ranching, or silviculture activities.
(c) Enforcement
(1) In general
To comply with subsection (b), at least once every 3 years a person or legal entity shall provide to the Secretary-
(A) a certification by a certified public accountant or another third party that is acceptable to the Secretary that the average adjusted gross income of the person or legal entity does not exceed the applicable limitation specified in that subsection; or
(B) information and documentation regarding the average adjusted gross income of the person or legal entity through other procedures established by the Secretary.
(2) Denial of program benefits
If the Secretary determines that a person or legal entity has failed to comply with this section, the Secretary shall deny the issuance of applicable payments and benefits specified in subsection (b)(2) to the person or legal entity, under similar terms and conditions as described in section 1308–2 of this title.
(3) Audit
The Secretary shall establish statistically valid procedures under which the Secretary shall conduct targeted audits of such persons or legal entities as the Secretary determines are most likely to exceed the limitations under subsection (b).
(d) Commensurate reduction
In the case of a payment or benefit described in subsection (b)(2) made in a crop, program, or fiscal year, as appropriate, to an entity, the amount of the payment or benefit shall be reduced by an amount that is commensurate with the direct and indirect ownership interest in the entity of each person who has an average adjusted gross income in excess of the applicable limitation specified in subsection (b).
[4]7 USC 1308-3a: Adjusted gross income limitation