Congress and the USDA have established requirements
to ensure that farm program payments only go to
farmers who are “actively engaged in farming.” The
2018 Farm Bill extends the payment eligibility and
payment limitation requirements for the 2019 through
the 2023 program years.
Actively Engaged in Farming
To be considered as “actively engaged in farming,”
a person or legal entity (partnerships, corporations,
and so forth) must provide significant contributions to
the farming operation. Contributions include capital,
land and/or equipment and active personal labor and/
or active personal management. The active personal
management contribution must be critical to the
profitability of the farming operation. All contributions
to the farming operation must be at risk of loss.
Payment Eligibility Provisions for
Joint Operations and Legal Entities
Comprised of Non-Family Members or
Partners, Stockholders or Persons with
an Ownership Interest in the Farming
General partnerships and joint ventures comprised of
non-family members must document the actions of
the members who make significant contributions of
management to the farming operation, defined as 500
hours of specific management activities per year, or
25 percent of the total management time necessary for
the success of the farming operation. Most farming
operations conducted by general partnerships and joint
ventures with non-family members will be limited to
only one member who can meet “actively engaged
in farming” requirements and qualify for payments
based solely on the documented contribution of active
personal management. Operations that can demonstrate
that they are large or complex farming operations,
according to newly established standards, may be
allowed an additional manager. Similarly, an operation
that can demonstrate that it is a large and complex
farming operation may qualify a third manager for
payment but only if all three managers can document
substantial management contributions to the operation.
The 2018 Farm Bill expands the definition of family
member to include a first cousin, niece and nephew.
The addition of first cousin, niece and nephew to
the definition applies to all payment eligibility
determinations, where applicable, effective
beginning with the 2019 program year.
Additional Payment Eligibility
Each partner, stockholder or member with an ownership
interest must contribute active personal labor and/or
active personal management to the farming operation
on a regular basis. The contribution must be identifiable
and documentable and separate and distinct from the
contributions made by any other partner, stockholder
or member. If any partner, stockholder or member with
an ownership interest fails to meet this requirement,
program payments will be reduced by the corresponding
share held by that partner, stockholder or member.
There is an exception allowed for legal entities, such
as corporations, if total direct payments received
both directly and indirectly by the legal entity and its
members do not exceed $125,000.
How it Works
Exceptions to the General Requirements
A person or legal entity that is also a landowner is
considered “actively engaged in farming” if the person
or legal entity landowner contributes the land to a
farming operation and in return receives rent or income
for the use of the land. The landowner’s share of the
profits or losses from the farming operation must also be
commensurate with the landowner’s contributions to the
farming operation; the contributions must be at risk of loss.
If one spouse has been determined to be “actively
engaged in farming,” the other spouse will also be
viewed as having met the significant contribution of
active personal labor or active personal management
in that same farming operation and toward meeting the
requirements of “actively engaged in farming.”
Sharecroppers may be considered “actively engaged
in farming” if the sharecropper makes a significant
contribution of active personal labor to the farming
operation and in return receives a specified share of the
crop or crops produced on the farm. The sharecropper’s
share of the profits or losses from the farming operation
must be commensurate with the sharecropper’s
contributions; the contributions must be at risk of loss.
Cash Rent Tenants
A cash-rent tenant is ineligible to receive payments on
cash-rented land unless the tenant makes a significant contribution
of active personal labor. If the cash-rent tenant does not
provide labor, he or she must make a significant contribution
of both active personal management and equipment to the
farming operation. All other “actively engaged in farming”
requirements apply as well.
Foreign persons, other than registered aliens, are not
eligible to receive certain benefits under some programs
such as the Agriculture Risk Coverage and Price Loss
Coverage programs and other specific programs, unless
the person provides a significant contribution of capital,
land and active personal labor to the farming operation.
Under some other programs (such as the Supplemental
Disaster Assistance Programs, the Market Facilitation
Program, or others), foreign persons are excluded from
program eligibility altogether regardless of contributions
to a farming operation.
Every legal entity earning payment must report to its
local FSA committee the name and social security
number of each person who owns, either directly or
indirectly, any interest in that legal entity. The legal
entity is also required to inform all members of the rules
regarding payment eligibility and payment limitation.
The 2018 Farm Bill establishes a maximum dollar
amount that can be received annually for each program,
directly or indirectly, by each person or legal entity.
Such limitations on payments are controlled by direct
attribution. Program payments made directly or
indirectly to a person are combined with the pro rata
interest held in any legal entity that received payment,
unless the payments to the legal entity have been
reduced by the pro rata share of the person.
Program payments made directly to a legal entity
are attributed to those persons who have a direct and
indirect interest in the legal entity, unless the payments
to the legal entity have been reduced by the pro rata
share of the person. Payment attribution to a legal entity
is tracked through four levels of ownership.
If any party to the ownership interest at the fourth level
is owned by another legal entity, a reduction in payment
will be applied to the payment entity in the amount that
represents the indirect interest of the fourth level entity
in the payment entity.
Common attribution means crediting payments made
to a person or legal entity collectively to one limitation
due to a unique or specific relationship between the
persons or legal entities. Common attribution applies to
a minor child and a parent or legal guardian and a parent
organization over a secondary organization when the
parent organization exercises control over the secondary
Ownership Interest for Direct Attribution
For the purposes of the direct attribution of payments,
ownership interest that a person or legal entity holds in a
legal entity on June 1 of the current year is used. Direct
attribution of payments is not applicable to cooperative
associations of producers. The payments will instead
be attributed to the members of the association that
produced the commodities marketed by the association
on behalf of the members.
Minor Child Rules
June 1 of the current year is the date a child is considered
to be a minor for payment attribution purposes. Payments
received both directly and indirectly by a minor child are
attributed to the parent or legal guardian.
Person – Payments made directly or indirectly to a
person cannot exceed the annual amounts specified in
the table on page 4.
Joint Operations and General Partnerships – Payments
made directly or indirectly to a joint operation such as
a general partnership, cannot exceed, for each payment
specified in the table on page 4, the amount determined
by multiplying the maximum payment amount specified
for a program by the number of persons and legal
entities that comprise the ownership
of the joint operation. Payments to the joint operation
will be reduced by an amount that represents the direct
or indirect ownership in the joint operation by any
person or legal entity that has reached the maximum
Legal Entities – Payments made directly or indirectly
to a legal entity cannot exceed the annual amounts
specified in the table on page 4. Payments made
to a legal entity will be reduced by an amount that
represents the direct or indirect ownership in the legal
entity by any person or legal entity that has reached the
Changes to Farming Operations
Changes to a farming operation resulting in an increase
in the number of persons to whom payment limitation
applies require the farming operation to also meet
“substantive change requirements.”
Such requirements include:
• Addition of a family member
• Changing from cash rent to share rent
• 20 percent increase in land used for agricultural
• Change in ownership by sale or gift of equipment
• Change in ownership by sale or gift of land or
Without a qualifying change, the newly added persons
will be determined ineligible for program benefits.
For more information on FSA programs, eligibility and related information, visit fsa.usda.gov.
Find your local USDA Service Center
To locate your local FSA office, visit farmers.gov/service-center-locator.