Attorneys Bill Bridgforth left and Rust Rumley at the April 22 MidSouth Agricultural and Environmental Law Conference in Memphis

Attorneys Bill Bridgforth, left, and Rust Rumley at the April 22 Mid-South Agricultural and Environmental Law Conference in Memphis.

Farm Payment Loophole Elimination Act onerous to producers

If passed, what Iowa Sen. Charles Grassley's ‘Farm Payment Loophole Elimination Act’ would mean for producers. Record-keeping nightmare could emerge.

With lawmakers continuing attempts to chop funding for farm country, another irritant and potential legal hazard has popped up.

“One of the things that has created so much turbulence is uncertainty over (government) payments, whether there will even be a payment,” said Bill Bridgforth at the April 22 Mid-South Agricultural and Environmental Law Conference co-sponsored by Delta Farm Press. “In dealing with bankers, they’re unable to factor in what payments may be. For example, for October 2016, it will be October 2017 before they know if there will be an ARC or PLC payment and what the amount will be. The timing makes it very difficult for a producer to stay in business.

“One thing to be cognizant of in dealing with client’s financial issues is some payments will decline. Even if commodity prices stay low, the payments will still decline.”

And Bridgforth, partner in Arkansas-based Ramsay, Bridgforth, Robinson, and Raley LLP, warned there’s a continuing fight in Washington to further restrict eligibility. “Iowa Sen. Charles Grassley – who in my mind is dedicated to destroying production agriculture in America – introduced a bill last week called the ‘Farm Payment Loophole Elimination Act.’ What he’s so upset about is in the initial bill the number of managers involved in a farming entity was limited to one. In the rules and regulations that ultimately came out, there can be a second manager listed if the operation is in excess of 2,500 acres – maybe 2,300 or 2,400 acres in certain situations. Also, if the operation isn’t just large but complex, there can be as many as three managers.

“Well, in Grassley’s bill, the manager listed would again be limited to one even if you farm 20,000 acres. He also takes issue with non-family members being easily involved in farming operations. The bill says if you’re a family member but aren’t active on the farm you can’t qualify for payments. He apparently doesn’t realize that the only family member that doesn’t have to qualify is a spouse. Whether he’s talking about doing away with the spouse rule, I don’t know but he’s trying to limit it.”

Imagine, said Bridgforth, “a sister is living in another state but is still very involved in the decisions made on the family farm. (Grassley) doesn’t want her to qualify for payments.”

Management rules

Further, the bill says a manager must do “’management activity performed on a regular, continuous and substantial basis and meet one of the following requirements: 25 percent of total management hours or at least 500 hours of management.’

“How long does it take to make a decision that a field needs to be sprayed? 30 seconds? How long does it take to make a decision to buy a new combine or tractor? This idea of 500 hours was initially brought up in the 1987 budget reconciliation act. In 1989, there was an effort in the (House) Agriculture Committee to put the hour limit in.

“There were saner heads, though, that said there’s no way to quantify effective management in hours. For example, the person who makes the decides to sell rice at $6 versus $3.70 may take an hour or two to make the decision that ultimately means the farm makes it, or not.”

The bill would limit the number of persons who can make a “significant contribution” to the operation. “Before you can get a third manager named, you have to be approved by the county committee and then go to the state FSA committee.

“If your client wants more than one manager, not only do they have to have the 500 hours and make particular management contributions, but they must maintain contemporaneous records or activity logs. The records must include the location where the management activity was performed. Can you imagine? ‘Sitting at breakfast table with wife. Made decision to irrigate Field Six.’ Plus, you have to record how much time it took to make the management decision.

“I guess if you’re driving down the highway and make a decision, you’re supposed to pull over to record it. ‘I made X decision at the mile 16 highway marker.’ It’s so onerous it seems obvious the rule was written by someone who’s never been involved in farming activity.”

Not new

It turns out bad record-keeping ideas have been percolating for some time. During the 2014 farm bill debate, Bridgforth received a call from someone in the office of Michigan Sen. Stabenow, chairman of the Senate Agriculture Committee. “He was working on this and asked me about a rule stating the only management decisions that you could count are those made on the farm. If you made the decision and weren’t actually on the farm, that shouldn’t count.

“I said, ‘Wait a minute. I live two miles from my farm HQ and, on the drive over I decide to make a management decision. That shouldn’t count? So, I should wait until I drive two miles to make the decision?’

“He said, ‘We just wanted to make sure and fix it so everything that counts has to be done on the farm.’ I wasn’t really guarded in my response of what a ridiculous idea that was.”

When you maintain these documents, “they must be available for review by the FSA if ever requested. You know farmers offices are normally the dashboard of their pickup. Can you see your farmer clients driving down the turn-row and there’s a log up on the dashboard. How realistic is it to think they’re going to write all this information down? What’s going to happen is, if that farmer decides to irrigate a field, he’ll write ‘thought about whether to irrigate field, one hour.’ In fact, they’ll just pick up the telephone and tell a hand ‘put some water on this field.’ That’s how it happens in the real world.”

Bridgforth warned that FSA is “creating a trap for farmers. (The Office of Inspector General) can use this rule to get anybody they want. ‘Did you really make that note contemporaneously or did you make it the next day?’ I don’t know how far they’ll take it, but what they’re talking about is just ridiculous.”

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