Payment Limitations

Many of FSA’s and NRCS’s program benefits are subject to specific payment limitation rules and payment limitation caps.

1. Programs and Payment Limits (Fact Sheet)
2. Notification Requirements
3. Direct Attribution / Common Attribution and Ownership Interest
4. Minor Child Rules
5. Substantive Change

About the Program

Every legal entity earning payment must report to their local FSA committee the name and social security number of each person who owns, either directly or indirectly, any interest in such 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 for each program that can be received annually, directly or indirectly, by each person or legal entity. Such limitation 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 that 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 part 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 organization.

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.

Any change in a farm operation, resulting in an increase in persons to which payment limitation applies, requires the farm operation to meet certain requirements. To be eligible for the increase in persons, the farm operation must be able to document one of the following bona-fide changes:

• The addition of a family member as defined in 6-PL and 7-CFR Part 1400
• Changing from cash rent to share rent
• Increase through acquisition of agricultural land of at least 20 percent or more of the total land previously involved in the farming operation. Note: This change qualifies no more than one additional person for payment limitation purposes.
• A bona fide change of ownership by sale or gift of equipment, land or livestock.

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 limitation.

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 maximum limitation.

This table contains the annual payment limitations for a person or legal entity for programs that are subject to the provisions of the 2014 Farm Bill.

1. Decouples the combined $125,000 payment limit for PLC, ARC, from Lon Loan Deficiency Program (LDP) and Market Loan Gain (MLG) for covered commodities and peanuts.

   Beginning with crop year 2019, LDP’s and MLG’s are no longer subject to Payment Limitation or Payment Eligibility provisions, including ‘actively engaged in farming’ and ‘cash-rent tenant’ provisions for covered commodities and peanuts.

   ARC and PLC payment are subject to a combined annual limitation of $125,000

2. The $500,000 Payment Limitation or Average Adjusted Gross Income (AGI) provisions do not apply to Rural Water Districts or Associations for land that is enrolled in CRP for the purpose of protecting a wellhead.
3. ECP payment limitation is increased from $200,000 per disaster event to $500,000 per disaster event.
4. A separate maximum payment limitation is provided of $125,000 on NAP payments for losses to crops with catastrophic coverage and a $300,000 maximum payment limitation on NAP payments for losses to crops with buy-up coverage.
5. The $125,000 payment limitation applicable to Emergency Assistance for Livestock, Honey Bees, and Farm Raised Fish Program (ELAP) payments is removed beginning in 2019. The $125,000 payment limitation applicable to the Livestock Indemnity Program (LIP) is removed effective January 1, 2017 and subsequent years.