As farm operations continue to grow and become more complex, multiple owners or members of a farming entity may consider themselves “farm managers” even though they never set a foot in the field. Characterizing oneself as a “farm manager” may entitle the individual to benefits under certain government programs. However, to obtain benefits from such programs an individual has to be considered actively engaged in farming, which means
(1) Contribute land, capital, or equipment; and
(2) Contribute personal labor, active personal management, or a combination of personal labor and active personal management.
The term “active personal management” has been subject to various interpretations, especially in non-family farming operations that are seeking to qualify more than one manager and collect more benefits. Therefore, the Agricultural Act of 2014 (Farm Bill) proposed a new rule to define what constitutes a “significant contribution of active personal management.”
The new rule would restrict the number of farm managers to one person, except in situations where the farming operation is considered a “large operation” or “complex operation”. While large and complex operations may qualify for two or three managers, no operation would be allowed more than three.
The new rule would also redefine “significant contribution of active personal management” as an annual contribution of 500 hours of management, or at least 25% of the total management required for that operation. Eligible management activities would include:
Capital, land and safety-net programs: Arrange financing, manage capital, acquire equipment, negotiate land acquisition and lease, and manage insurance or USDA program participation
Labor: Hire and manage labor; and
Agronomics and Marketing: Decide which crop(s) to plant, purchase inputs, manage crops, … price crops, and market crops or futures.
The newly proposed standard was created for those farming operations structured as general partnerships or joint ventures rather than family farming operations. Consequently, the new rule would not affect farming operations made up by family members, landowners who share a risk in the crop, or spouses whose husband or wife are actively engaged in farming.
The comment period for the proposed rule ended in May and are to be implemented in 2016. Farm operations with multiple “farm managers” need to ensure the they meet the new requirements of “actively engaged in farming” prior to seeking benefits from various farm programs.
For more information please check out the Farm Service Agency website here, and the fully version of the proposed rule here.