ACT NOW TO SUPPORT FAMILY FARMS AND SHUT DOWN THE MULTIMILLION DOLLAR FARM SUBSIDY LOOPHOLE

An Action Alert from the National Sustainable Agriculture Coalition The 2008 Farm Bill handed President Obama and USDA Secretary Vilsack a rare opportunity to close one of the biggest payment limit loopholes in current regulations.  The nation’s largest farms collect unlimited annual production subsidies under rules that permit payments to those who provide only minimal farm management and no active labor.  President Obama and Secretary Vilsack need to hear a loud and clear message from farmers and other citizens who care about the future of farming: The time is now to close the loophole that allows widespread abuse of payment limitation law! COMMENTS MUST BE RECEIVED BEFORE APRIL 6, 2009 Where to Send Your Email or Letter:  There are three easy ways to respond:

  • Send an email to Dan McGlynn at USDA at Dan.McGlynn@wdc.usda.gov, or
  • Send him a letter by fax to 202-690-2130, or
  • Send a letter by mail to Dan McGlynn, Farm Service Agency, USDA, Stop 0517, Room 4754, 1400 Independence Avenue SW, Washington, DC 20250-0517.
Be sure to include at the top of the letter the following:  “Comment on Farm Program Payment Limitation Rule, Federal Register, Vol. 74, No. 23, February 5, 2009”

Talking Points: Here are some points to pick and choose from and put in your own words in your email or letter to USDA:
  • The biggest of all payment limitation loopholes allows large farms to find multiple “partners” to fulfill the “actively engaged in farming” requirement by providing only minimal personal management and zero personal labor.  In some cases, participating in just two conference calls a year has been enough to pass the actively engaged in farming test.  This management loophole must be closed or mega-farms will continue to collect huge multimillion dollar annual payments, funneling payments through passive investors, non-farm businesses, and sham “paper” farms.  Those ill-gotten excess subsidies are used to outbid smaller farmers and beginning farmers for land, leading to land concentration and the slow demise of family farming.  This loophole is strangling the economic future of rural communities and choking off economic opportunity and farm entry for the next generation of farmers.
  • When a person tries to qualify for farm payments by providing only active personal management and no personal labor, the rules should require the person to provide at least half of the total management required to run the farm or at least half of the total management that would be necessary to conduct a farming operation commensurate in size with his/her requisite share of the operation.  This is the key point that must be addressed in developing the new rule.
  • The “actively engaged in farming” rules do not apply to landlords, so tightening it will not interfere with crop share leases.  Widows and heirs who rent their land through crop share leases will not be affected by tightening the rules.  But tightening the rules will prevent mega farms from collecting unlimited farm payments.
  • Closing the “actively engaged in farming” management loophole will strengthen family farms and rural communities, save federal resources, and help restore integrity to a program which is sadly still rife with abuse.
  • Both Republican and Democratic Administrations have for decades either added regulatory loopholes or at best looked the other way and allowed the abuse to continue.  This Administration, which campaigned on commodity program payment reform, needs to end business as usual, clean up the system, and restore good government.  Enacting a quantifiable test for farm management is the place to start because it is the granddaddy of all loopholes.
Background:  In the 2008 Farm Bill, Congress directed USDA to rewrite the regulations used to determine whether a person is “actively engaged” in farming and thus eligible for payments.  The Bush Administration issued an interim rule right before leaving office that takes a few small steps forward, but leaves the big loophole wide open, thus ensuring the continuation of unlimited payments to mega-farms. Rather than continuing to nibble around the edges of the problem, the Obama Administration needs to go right to the heart of the matter, close the loophole, and stop wasting taxpayer’s money in an annual bailout scheme that puts the mid-sized family farm at an unfair competitive disadvantage with mega farms. Under current rules, to be eligible for payments under the labor test one must provide 1,000 hours of labor a year or half of one’s requisite share of the total labor to operate the farm, but to be eligible for payments under the alternative management test, anything goes -- there is no quantifiable standard.  Congress’ own Government Accountability Office found that mega farms have been funneling payments through people who are not farmers, who do not live anywhere near the farm, and who participate in a couple conference calls a year, calling these people “farm managers” each of whom then becomes eligible for a full payment. Those “two conference call a year” people are among the simpler schemes used to evade the law.  There are more complex ones as well.  For example, the Government Accountability Office provides this illustrative example:
A general partnership that farms more than 50,000 acres was divided into more than 30 non-farming entity corporations which together collected over $5 million in annual farm payments in 2001  However, the partnership reported a net loss in 2001 due to its transactions with those non-farming entities, including a land leasing company, equipment and petroleum dealerships and crop processing companies.  These non-farming entities charged above-market prices for goods and services, including excessive charges for storage and processing, and paid below-market prices for the harvest.  All the non-farm entities had ownership linked to one individual.   This served to take payments from many different "farms" and concentrate them into profits for a single person.
These schemes to rip off the taxpayer and put family farmers out of business are an outrage, and it is time to put a stop to it!  Please write to USDA today and say enough is enough!  Tell them to fix the rule now by adding a real, quantifiable management test and then actively enforce the law against those who try to continue to bilk the program. Thanks for your action to support family farms! National Sustainable Agriculture Coalition 110 Maryland Avenue NE Washington, D.C. 20002 Phone: (202) 547-5754 Fax: (202) 547-1837

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