S. 1161 (112th): Rural America Preservation Act of 2011

112th Congress, 2011–2013. Text as of Jun 09, 2011 (Introduced).

Status & Summary | PDF | Source: GPO

II

112th CONGRESS

1st Session

S. 1161

IN THE SENATE OF THE UNITED STATES

June 9, 2011

(for himself and Mr. Johnson of South Dakota) introduced the following bill; which was read twice and referred to the Committee on Agriculture, Nutrition, and Forestry

A BILL

To amend the Food Security Act of 1985 to restore integrity to and strengthen payment limitation rules for commodity payments and benefits.

1.

Short title

This Act may be cited as the Rural America Preservation Act of 2011.

2.

Payment limitations

Section 1001 of the Food Security of 1985 (7 U.S.C. 1308) is amended—

(1)

in subsection (a), by striking paragraph (3) and inserting the following:

(3)

Legal entity

(A)

In general

The term legal entity means—

(i)

an organization that (subject to the requirements of this section and section 1001A) is eligible to receive a payment under a provision of law referred to in subsection (b), (c), or (d);

(ii)

a corporation, joint stock company, association, limited partnership, limited liability company, limited liability partnership, charitable organization, estate, irrevocable trust, grantor of a revocable trust, or other similar entity (as determined by the Secretary); and

(iii)

an organization that is participating in a farming operation as a partner in a general partnership or as a participant in a joint venture.

(B)

Exclusion

The term legal entity does not include a general partnership or joint venture.

;

(2)

in subsection (b)—

(A)

in paragraphs (1), (2), and (3), by striking (except a joint venture or a general partnership) each place it appears;

(B)

in paragraph (1)(A), by striking $40,000 and inserting $20,000; and

(C)

in paragraphs (2) and (3)(A), by striking $65,000 each place it appears and inserting $30,000;

(3)

in subsection (c)—

(A)

in paragraphs (1), (2), and (3), by striking (except a joint venture or a general partnership) each place it appears;

(B)

in paragraph (1)(A), by striking $40,000 and inserting $20,000; and

(C)

in paragraphs (2) and (3)(A), by striking $65,000 each place it appears and inserting $30,000;

(4)

by striking subsection (d) and inserting the following:

(d)

Limitations on marketing loan gains, loan deficiency payments, and commodity certificate transactions

The total amount of the following gains and payments that a person or legal entity may receive during any crop year may not exceed $75,000:

(1)
(A)

Any gain realized by a producer from repaying a marketing assistance loan for 1 or more loan commodities and peanuts under subtitle B or C of title I of the Food, Conservation, and Energy Act of 2008 (7 U.S.C. 8731 et seq.) at a lower level than the original loan rate established for the loan commodity under those subtitles.

(B)

In the case of settlement of a marketing assistance loan for 1 or more loan commodities and peanuts under those subtitles by forfeiture, the amount by which the loan amount exceeds the repayment amount for the loan if the loan had been settled by repayment instead of forfeiture.

(2)

Any loan deficiency payments received for 1 or more loan commodities and peanuts under those subtitles.

(3)

Any gain realized from the use of a commodity certificate issued by the Commodity Credit Corporation for 1 or more loan commodities and peanuts, as determined by the Secretary, including the use of a certificate for the settlement of a marketing assistance loan made under those subtitles or section 1307 of that Act (7 U.S.C. 7957).

;

(5)

by redesignating subsections (e) through (h) as subsections (f) through (i), respectively;

(6)

by inserting after subsection (d) the following:

(e)

Spousal equity

(1)

In general

Notwithstanding subsections (b) through (d), except as provided in paragraph (2), if a person and the spouse of the person are covered by paragraph (2) and receive, directly or indirectly, any payment or gain covered by this section, the total amount of payments or gains (as applicable) covered by this section that the person and spouse may jointly receive during any crop year may not exceed an amount equal to twice the applicable dollar amounts specified in subsections (b), (c), and (d).

(2)

Exceptions

(A)

Separate farming operations

In the case of a married couple in which each spouse, before the marriage, was separately engaged in an unrelated farming operation, each spouse shall be treated as a separate person with respect to a farming operation brought into the marriage by a spouse, subject to the condition that the farming operation shall remain a separate farming operation, as determined by the Secretary.

(B)

Election to receive separate payments

A married couple may elect to receive payments separately in the name of each spouse if the total amount of payments and benefits described in subsections (b), (c), and (d) that the married couple receives, directly or indirectly, does not exceed an amount equal to twice the applicable dollar amounts specified in those subsections.

;

(7)

in paragraph (3)(B) of subsection (g) (as redesignated by paragraph (5)), by adding at the end the following:

(iii)

Irrevocable trusts

In promulgating regulations to define the term legal entity as the term applies to irrevocable trusts, the Secretary shall ensure that irrevocable trusts are legitimate entities that have not been created for the purpose of avoiding a payment limitation.

; and

(8)

in subsection (i) (as redesignated by paragraph (5)), in the second sentence, by striking or other entity and inserting or legal entity.

3.

Substantive change; payments limited to active farmers

The Food Security Act of 1985 is amended by striking section 1001A (7 U.S.C. 1308–1) and inserting the following:

1001A.

Substantive change; payments limited to active farmers

(a)

Substantive change

(1)

In general

For purposes of the application of limitations under this section, the Secretary shall not approve any change in a farming operation that otherwise would increase the number of persons or legal entities to which the limitations under this section apply, unless the Secretary determines that the change is bona fide and substantive.

(2)

Family members

For the purpose of paragraph (1), the addition of a family member to a farming operation under the criteria established under subsection (b)(3)(B) shall be considered to be a bona fide and substantive change in the farming operation.

(3)

Primary control

To prevent a farm from reorganizing in a manner that is inconsistent with the purposes of this Act, the Secretary shall promulgate such regulations as the Secretary determines to be necessary to simultaneously attribute payments for a farming operation to more than 1 person or legal entity, including the person or legal entity that exercises primary control over the farming operation, including to respond to—

(A)
(i)

any instance in which ownership of a farming operation is transferred to a person or legal entity under an arrangement that provides for the sale or exchange of any asset or ownership interest in 1 or more legal entities at less than fair market value; and

(ii)

the transferor is provided preferential rights to repurchase the asset or interest at less than fair market value; or

(B)

a sale or exchange of any asset or ownership interest in 1 or more legal entities under an arrangement under which rights to exercise control over the asset or interest are retained, directly or indirectly, by the transferor.

(b)

Payments limited to active farmers

(1)

In general

To be eligible to receive, directly or indirectly, payments or benefits described as being subject to limitation in subsection (b) through (d) of section 1001 with respect to a particular farming operation, a person or legal entity shall be actively engaged in farming with respect to the farming operation, in accordance with paragraphs (2), (3), and (4).

(2)

General classes actively engaged in farming

(A)

Definition of active personal management

In this paragraph, the term active personal management means, with respect to a person, administrative duties carried out by the person for a farming operation—

(i)

that are personally provided by the person on a regular, continuous, and substantial basis; and

(ii)

relating to the supervision and direction of—

(I)

activities and labor involved in the farming operation; and

(II)

onsite services directly related and necessary to the farming operation.

(B)

Active engagement

Except as provided in paragraph (3), for purposes of paragraph (1), the following shall apply:

(i)

A person shall be considered to be actively engaged in farming with respect to a farming operation if—

(I)

the person makes a significant contribution, as determined under subparagraph (E) (based on the total value of the farming operation), to the farming operation of—

(aa)

capital, equipment, or land; and

(bb)

personal labor and active personal management;

(II)

the share of the person of the profits or losses from the farming operation is commensurate with the contributions of the person to the operation; and

(III)

a contribution of the person is at risk.

(ii)

A legal entity shall be considered to be actively engaged in farming with respect to a farming operation if—

(I)

the legal entity makes a significant contribution, as determined under subparagraph (E) (based on the total value of the farming operation), to the farming operation of capital, equipment, or land;

(II)
(aa)

the stockholders or members that collectively own at least 51 percent of the combined beneficial interest in the legal entity each make a significant contribution of personal labor and active personal management to the operation; or

(bb)

in the case of a legal entity in which all of the beneficial interests are held by family members, any stockholder or member (or household comprised of a stockholder or member and the spouse of the stockholder or member) who owns at least 10 percent of the beneficial interest in the legal entity makes a significant contribution of personal labor or active personal management; and

(III)

the legal entity meets the requirements of subclauses (II) and (III) of clause (i).

(C)

Legal entities making significant contributions

If a general partnership, joint venture, or similar entity (as determined by the Secretary) separately makes a significant contribution (based on the total value of the farming operation involved) of capital, equipment, or land, the partners or members making a significant contribution of personal labor or active personal management and meeting the standards provided in subclauses (II) and (III) of subparagraph (B)(i) shall be considered to be actively engaged in farming with respect to the farming operation involved.

(D)

Equipment and personal labor

In making determinations under this subsection regarding equipment and personal labor, the Secretary shall take into consideration the equipment and personal labor normally and customarily provided by farm operators in the area involved to produce program crops.

(E)

Significant contribution of personal labor or active personal management

(i)

In general

Subject to clause (ii), for purposes of subparagraph (B), a person shall be considered to be providing, on behalf of the person or a legal entity, a significant contribution of personal labor and active personal management, if the total contribution of personal labor and active personal management is at least equal to the lesser of—

(I)

1,000 hours; and

(II)

a period of time equal to—

(aa)

50 percent of the commensurate share of the total number of hours of personal labor and active personal management required to conduct the farming operation; or

(bb)

in the case of a stockholder or member (or household comprised of a stockholder or member and the spouse of the stockholder or member) that owns at least 10 percent of the beneficial interest in a legal entity in which all of the beneficial interests are held by family members who do not collectively receive payments directly or indirectly, including payments received by spouses, of more than twice the applicable limit, 50 percent of the commensurate share of hours of the personal labor and active personal management of all family members required to conduct the farming operation.

(ii)

Minimum labor hours

For the purpose of clause (i), the minimum number of labor hours required to produce a commodity shall be equal to the number of hours that would be necessary to conduct a farming operation for the production of each commodity that is comparable in size to the commensurate share of a person or legal entity in the farming operation for the production of the commodity, based on the minimum number of hours per acre required to produce the commodity in the State in which the farming operation is located, as determined by the Secretary.

(3)

Special classes actively engaged in farming

Notwithstanding paragraph (2), the following persons shall be considered to be actively engaged in farming with respect to a farm operation:

(A)

Landowners

A person or legal entity that is a landowner contributing owned land, and that meets the requirements of subclauses (II) and (III) of paragraph (2)(B)(i), if, as determined by the Secretary—

(i)

the landowner share-rents the land at a rate that is usual and customary; and

(ii)

the share received by the landowner is commensurate with the share of the crop or income received as rent.

(B)

Family members

With respect to a farming operation conducted by persons who are family members, or a legal entity the majority of the stockholders or members of which are family members, an adult family member who makes a significant contribution (based on the total value of the farming operation) of active personal management or personal labor and, with respect to such contribution, who meets the requirements of subclauses (II) and (III) of paragraph (2)(B)(i).

(C)

Sharecroppers

A sharecropper who makes a significant contribution of personal labor to the farming operation and, with respect to such contribution, who meets the requirements of subclauses (II) and (III) of paragraph (2)(B)(i), and who was receiving payments from the landowner as a sharecropper prior to the effective date of the Food, Conservation, and Energy Act of 2008 (Public Law 110–246; 122 Stat. 1651).

(4)

Persons and legal entities not actively engaged in farming

For the purposes of paragraph (1), except as provided in paragraph (3), the following persons and legal entities shall not be considered to be actively engaged in farming with respect to a farm operation:

(A)

Landlords

A landlord contributing land to the farming operation if the landlord receives cash rent, or a crop share guaranteed as to the amount of the commodity to be paid in rent, for such use of the land.

(B)

Other persons and legal entities

Any other person or legal entity, or class of persons or legal entities, that fails to meet the requirements of paragraphs (2) and (3), as determined by the Secretary.

(5)

Personal labor and active personal management

No stockholder or member may provide personal labor or active personal management to meet the requirements of this subsection for persons or legal entities that collectively receive, directly or indirectly, an amount equal to more than twice the applicable limits under subsections (b), (c), and (d) of section 1001.

(6)

Custom farming services

A person or legal entity receiving custom farming services will be considered separately eligible for payment limitation purposes if the person or legal entity is actively engaged in farming based on paragraphs (1) through (3).

(7)

Growers of hybrid seed

To determine whether a person or legal entity growing hybrid seed under contract shall be considered to be actively engaged in farming, the Secretary shall not take into consideration the existence of a hybrid seed contract.

(c)

Notification by legal entities

To facilitate the administration of this section, each legal entity that receives payments or benefits described as being subject to limitation in subsection (b), (c), or (d) of section 1001 with respect to a particular farming operation shall—

(1)

notify each person or other legal entity that acquires or holds a beneficial interest in the farming operation of the requirements and limitations under this section; and

(2)

provide to the Secretary, at such times and in such manner as the Secretary may require, the name and social security number of each person, or the name and taxpayer identification number of each legal entity, that holds or acquires such a beneficial interest.

.

4.

Foreign persons and legal entities made ineligible for program benefits

Section 1001C of the Food Security Act of 1985 (7 U.S.C. 1308–3) is amended—

(1)

in the section heading, by striking persons and inserting persons and legal entities;

(2)

in subsection (b)—

(A)

in the subsection heading, by striking Corporation or other and inserting Legal;

(B)

in the first sentence, by striking a corporation or other entity shall be considered a person that and inserting a legal entity; and

(C)

in the second sentence, by striking an entity and inserting a legal entity; and

(3)

in subsection (c), by striking person and inserting legal entity or person.

5.

Regulations

(a)

In general

The Secretary of Agriculture may promulgate such regulations as are necessary to implement this Act and the amendments made by this Act.

(b)

Procedure

The promulgation of the regulations and administration of this Act and the amendments made by this Act shall be made without regard to—

(1)

the notice and comment provisions of section 553 of title 5, United States Code;

(2)

the Statement of Policy of the Secretary of Agriculture effective July 24, 1971 (36 Fed. Reg. 13804), relating to notices of proposed rulemaking and public participation in rulemaking; and

(3)

chapter 35 of title 44, United States Code (commonly known as the Paperwork Reduction Act).

(c)

Congressional review of agency rulemaking

In carrying out this section, the Secretary shall use the authority provided under section 808 of title 5, United States Code.

6.

Budgetary effects

The budgetary effects of this Act, for the purpose of complying with the Statutory Pay-As-You-Go Act of 2010, shall be determined by reference to the latest statement titled Budgetary Effects of PAYGO Legislation for this Act, submitted for printing in the Congressional Record by the Chairman of the Senate Budget Committee, provided that such statement has been submitted prior to the vote on passage.