Payment Limitation and Payment Eligibility; Actively Engaged in Farming, 78119-78130 [2015-31532]

Agencies

• DEPARTMENT OF AGRICULTURE
• Commodity Credit Corporation

[Federal Register Volume 80, Number 241 (Wednesday, December 16, 2015)]
[Rules and Regulations]
[Pages 78119-78130]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-31532]



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Federal Register / Vol. 80, No. 241 / Wednesday, December 16, 2015 / 
Rules and Regulations

[[Page 78119]]



DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1400

RIN 0560-AI31


Payment Limitation and Payment Eligibility; Actively Engaged in 
Farming

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This rule changes the requirements for a person to be 
considered actively engaged in farming for the purpose of payment 
eligibility for certain Farm Service Agency (FSA) and Commodity Credit 
Corporation (CCC) programs. Specifically, this rule amends and 
clarifies the requirements for a significant contribution of active 
personal management to a farming operation. These changes are required 
by the Agricultural Act of 2014 (the 2014 Farm Bill). The provisions of 
this rule do not apply to persons or entities comprised entirely of 
family members. The rule does not change the existing regulations as 
they relate to contributions of land, capital, equipment, or labor, or 
the existing regulations related to landowners with a risk in the crop 
or to spouses. This rule will apply to eligibility for payments earned 
for the 2016 crop or program year for farming operations with only 2016 
spring planted crops, and to eligibility for payments for the 2017 and 
subsequent crop or program years for all farming operations (those with 
either spring or fall planted crops).

DATES: This rule is effective December 16, 2015.

FOR FURTHER INFORMATION CONTACT: James Baxa; Telephone: (202) 720-7641. 
Persons with disabilities who require alternative means for 
communication should contact the USDA Target Center at (202) 720-2600 
(voice).

SUPPLEMENTARY INFORMATION: 

Overview

    CCC programs managed by FSA, specifically the Market Loan Gains 
(MLG) and Loan Deficiency Payments (LDP) associated with the Marketing 
Assistance Loan (MAL) Program, the Agriculture Risk Coverage (ARC) 
Program, and the Price Loss Coverage (PLC) Program, require that a 
person or legal entity be ``actively engaged in farming'' as a 
condition of eligibility for payments. As specified in 7 CFR part 1400, 
a person or legal entity must contribute: (1) Land, capital, or 
equipment; and (2) active personal labor, active personal management, 
or a combination of active personal labor and active personal 
management to be considered ``actively engaged in farming'' for the 
purposes of payment eligibility.
    Section 1604 of the 2014 Farm Bill (Pub. L. 113-79) requires the 
Secretary of Agriculture to define in regulations what constitutes a 
``significant contribution of active personal management'' for the 
purpose of payment eligibility. CCC published a proposed rule in the 
Federal Register on March 26, 2015, (80 FR 15916-15921) to implement 
the changes required by the 2014 Farm Bill. CCC received 95 comments on 
the proposed rule. The comments and responses are discussed later in 
this document. No major changes are being made in response to comments, 
because FSA has determined that the comments support the definitions 
and requirements for ``actively engaged in farming'' specified in the 
proposed rule and support limiting eligibility for farm payments. Also, 
there was no consensus amongst the comments for any alternative payment 
eligibility provisions that would address the 2014 Farm Bill 
requirements. FSA has made minor changes from the proposed rule in this 
final rule to respond to commenters' requests for clarifications of 
certain provisions.
    As specified in the proposed rule, this final rule amends 7 CFR 
part 1400 to define what constitutes a significant contribution of 
active personal management and to revise the requirements for active 
personal management contributions. The 2014 Farm Bill also directed the 
Secretary to consider the establishment of limits on the number of 
persons per farming operation who may be considered actively engaged in 
farming based on a significant contribution of active personal 
management. Based on this directive, a limit was established in the 
proposed rule and this final rule therefore amends 7 CFR part 1400 to 
set a limit on the number of persons per farming operation who may 
qualify as actively engaged in farming based on a significant 
contribution of active personal management, or a combination of active 
personal management and active personal labor. The new requirements and 
definitions are specified in a new subpart G to 7 CFR part 1400.

Exceptions for Entities Comprised Solely of Family Members

    As required by the 2014 Farm Bill, the provisions of this rule do 
not apply to farming operations comprised solely of family members. 
This rule does not revise the definition of ``family member.'' As 
specified in 7 CFR 1400.3, a family member is ``a person to whom 
another member in the farming operation is related as a lineal 
ancestor, lineal descendant, sibling, spouse, or otherwise by 
marriage.'' This definition is consistent with 7 U.S.C. 1308, which is 
the authority for the definition. FSA handbooks further clarify that 
eligible family members include: Great grandparent, grandparent, 
parent, child, including legally adopted children and stepchildren, 
grandchild, great grandchild, or a spouse or sibling of family members.
    In 7 CFR 1400.208, there are existing provisions for family members 
to be considered actively engaged in farming by making a significant 
contribution of active personal labor, or active personal management, 
or a combination thereof, to a farming operation comprised of a 
majority of family members, without making a contribution of land, 
equipment, or capital. The new subpart G does not change these 
provisions.

Existing Provisions and Exceptions for Actively Engaged Requirements 
That Are Not Changed

    As specified in the current regulations, there are exceptions to 
the requirement that a person must contribute labor or management to be 
considered actively engaged in farming.

[[Page 78120]]

These exceptions for certain landowners and for spouses are not changed 
with this rule. Specifically, a person or legal entity that is a 
landowner who makes a significant contribution of owned land to the 
farming operation and receives rent or income for such use of the land 
based on the land's production or the operation's operating results, 
and who therefore shares a financial risk in the crop (profit or loss 
is based on value of crop and not from a fixed rent amount) is 
considered to be actively engaged. A landowner who meets that 
requirement of sharing financial risk in the crop is not required to 
contribute labor or management to be considered actively engaged in 
farming. If one spouse, or an estate of a deceased spouse, is 
considered to be actively engaged in farming the other spouse is 
considered to be actively engaged without making a separate, additional 
contribution of management or labor. The spouse exemption as specified 
in the current regulations applies regardless of whether the other 
spouse has qualified as actively engaged through a contribution of 
management or labor or as a landowner sharing risk in the crop.
    The final rule specifies how persons and legal entities comprised 
of nonfamily members may be determined eligible for payments, based on 
a contribution of active personal management made by persons with a 
direct or indirect interest in the farming operation. Payments made to 
persons or legal entities are attributed to persons as specified in 7 
CFR 1400.105 and the methods for attribution remain unchanged with this 
rule.

Additional Requirements for Certain Nonfamily General Partnerships and 
Joint Ventures

    The revised definition of what constitutes a significant 
contribution of active personal management in this rule apply only to 
certain nonfamily farming operations seeking to have more than one 
person qualify as actively engaged in farming by providing a 
significant contribution of active personal management. Such person is 
referred to as a ``farm manager'' for the purposes of this rule. This 
rule only applies to farming operations structured as general 
partnerships or joint ventures that seek to qualify more than one farm 
manager. The existing requirements that farming operations supply 
information to FSA county committees (COC) on each member's 
contribution or expected contribution of labor or management related to 
actively engaged determinations remain unchanged and continue to apply. 
However, each of the members of farming operations subject to this 
final rule that are determined to be actively engaged in farming by 
their contribution of active personal management, or the contribution 
of the combination of active personal labor and active personal 
management, will also be required to keep and provide a management log.
    For most farming operations that are legal entities, such as 
corporations and limited liability companies, adding an additional 
member to the entity does not affect the number of payment limits 
available; it simply increases the number of members that can share a 
single $125,000 payment limit, should such a limit be reached. But for 
general partnerships and joint ventures, adding another member to the 
operation can provide the availability of an additional $125,000 
payment limit if the new member meets the other eligibility 
requirements, including being determined as actively engaged in 
farming. This potential for a farming operation being able to qualify 
for multiple payment limits provides an opportunity to add members and 
to have those members claim actively engaged in farming status, each 
with an additional and separate payment limitation, especially for 
farming operations earning annual program payments in an amount close 
to or in excess of the payment limitation.
    For this reason, several additional requirements now apply to 
nonfamily farming operations seeking to qualify more than one farm 
manager. Specifically, in addition to the existing requirements that 
farming operations must provide information to FSA on how each of their 
members qualify as actively engaged based on a contribution of labor, 
management, land, capital, and equipment, a limit is placed on the 
number of members of a farming operation that can be qualified as a 
farm manager. Also, an additional recordkeeping requirement now applies 
for each member of such farming operations contributing any active 
personal management. These additional requirements also apply to 
individuals requesting to qualify with a combination of labor and 
management if their farming operation is seeking to have more than one 
farm manager (combinations of labor and management can qualify as 
actively engaged in farming).

Number of Farm Managers That May Qualify As Actively Engaged

    This rule restricts the number of farm managers to one person per 
farming operation, with exceptions. Nonfamily farming operations 
seeking only one member to qualify as actively engaged in farming with 
only a significant contribution of management or a combination of labor 
and management (one farm manager) are not subject to the new 
requirements of 7 CFR part 1400 subpart G. They are still, however, 
subject to the existing requirements of being actively engaged, as they 
were prior to this rule. In other words, such operations will continue 
to be subject to the existing regulations in subparts A and C of 7 CFR 
part 1400 that specify the requirements to be considered actively 
engaged in farming.
    Any farming operation seeking two or three farm managers must meet 
the requirements of subpart G for all farm managers in the farming 
operation, including documenting that each of the two (or three) 
individuals are actively engaged in farming by their contribution of 
active personal management (or a combination of labor and management) 
by the maintenance of the records or logs discussed below for all the 
members in the farming operation. If one person of the farming 
operation meets the requirements for being actively engaged in farming 
by making a contribution of active personal management, and that 
farming operation seeks to qualify an additional farm manager, the 
farming operation must meet the requirements that it is a large 
operation or a complex operation as specified in this rule. To qualify 
a total of three farm managers, the operation is required to meet the 
requirements specified in this rule for both size and complexity. In 
other words, a very large farm operation that is not complex (for 
example, one growing a single crop) may only qualify for two farm 
managers, not three. Under no circumstances is a farming operation 
allowed to qualify more than a total of three persons as farm managers.
    The default standard for what constitutes a large farming operation 
is an operation with crops on more than 2,500 acres (planted or 
prevented planted) or honey or wool with more than 10,000 hives or 
3,500 ewes, respectively. The acreage standard is based on an analysis 
of responses to the Agricultural Resource Management Survey (ARMS) 
conducted by the USDA Economic Research Service and National 
Agricultural Statistics Service. The results of that survey indicate 
that on average, farms producing eligible commodities that required 
more than one full time manager equivalent (2,040 hours of management) 
had a size of 2,527 acres. (See https://www.ers.usda.gov/data-products/arms-farm-financial-and-crop-production-practices.aspx for more 
information on the survey.) The size standards for

[[Page 78121]]

honey and wool did not have comparable survey information available. 
The honey standard for the number of hives is based on the beekeepers 
participating in 2011 through 2012 Emergency Assistance for Livestock, 
Honey Bees, and Farm-Raised Fish that met or exceeded the payment 
limit. These large operations averaged 10,323 hives. The standard 
established for sheep was based on industry analysis that showed that 
operations with 1,500 through 2,000 ewes could be full time. The 3,500 
ewes standard is approximately double that threshold. Each State FSA 
committee (STC) has authority to modify these size standards for their 
state based on the STC's determination of the relative size of farming 
operations in the state by up to 15 percent (that is plus or minus 375 
acres, 1,500 hives, or 525 ewes). In other words, the standard in a 
particular state may range from 2,125 acres to 2,875 acres; 8,500 to 
11,500 hives; or 2,975 to 4,025 ewes. Any deviation from the State 
level standards may only be granted on a case by case basis by the FSA 
Deputy Administrator for Farm Programs (DAFP).
    If a farming operation seeks an additional farm manager based on 
the complexity of the operation, such operation must make a request to 
the FSA state committee that demonstrates complexity by addressing the 
factors established in this rule. The complexity factors specified in 
this rule take into account the diversity of the operation including 
the number of agricultural commodities produced; whether irrigation is 
used; the types of agricultural crops produced such as field, 
vegetable, or orchard crops; the geographical area in which an 
operation farms and produces agricultural commodities; alternative 
marketing channels (that is, fresh, wholesale, farmers market, or 
organic); and other aspects about the farming operation such as the 
production of livestock, types of livestock, and the various livestock 
products produced and marketed annually. The addition of a second or 
third farm manager to be considered actively engaged in farming must be 
approved by the STC, and is subject to review by DAFP. The final review 
and concurrence by DAFP is intended to ensure consistency and fairness 
on a national level.

Records on the Performance of Management Activities

    As specified in this final rule, if a farming operation seeks to 
qualify more than one farm manager as actively engaged in farming, then 
all persons that provide any management to the farming operation are 
required to maintain contemporaneous records or activity logs of their 
management activities, including the management activities that may not 
qualify as active personal management under this rule. Specifically, 
activity logs must include information about the hours of management 
performed for the farming operation. While the recordkeeping 
requirements under this rule are similar to the current provisions at 7 
CFR 1400.203 and 1400.204 in which contributions must be identifiable 
and documentable, and separate and distinct from the contributions of 
other members, these additional records or logs must also include the 
location of where the management activity was performed (either on-site 
or remote) and the time expended or duration of the management activity 
performed. These records and logs must be made available if requested 
by the appropriate FSA reviewing authority. If a person or member 
initially determined as actively engaged in farming by a represented 
contribution of active personal management to the farming operation 
fails to provide these management activity records within a reasonable 
amount on time, usually 30 days, the represented contribution of active 
personal management will be disregarded and the person's eligibility 
for payments will be re-determined.
    Section 1604 of the Farm Bill requires USDA to ensure that any 
additional paperwork required by this rule be limited only to persons 
in farming operations who would be subject to this rule. As described 
above, the additional recording and recordkeeping requirements of this 
rule only apply to persons in farming operations that seek to qualify 
more than one farm manager as actively engaged in farming.

New Definition of Significant Contribution of Active Personal 
Management

    The existing definition of a ``significant contribution'' in 7 CFR 
1400.3 specifies that for active personal management, a significant 
contribution includes ``activities that are critical to the 
profitability of the farming operation,'' but that definition does not 
specify what specific types of activities are included, whether these 
activities need to be direct actions and not passive activities, and to 
what level or quantity such activities must be performed to achieve a 
level of significance.
    This final rule specifies a new definition of ``significant 
contribution of active personal management'' that applies only to non-
family farming operations that seek to qualify more than one person as 
a farm manager. Similar to the existing requirements in 7 CFR 1400.3 
for a substantial amount of active personal labor, the new definition 
for a significant contribution of active personal management requires 
an annual contribution of 500 hours of management, or at least 25 
percent of the total management required for that operation. This final 
rule also adds a new, more specific definition for ``active personal 
management'' that includes a list of critical management activities 
that qualify as a significant contribution if such activities are 
annually performed to either of the minimum levels established (500 
hours or 25 percent of the total management hours required for the 
operation on an annual basis).
    The new definition changes what constitutes ``active personal 
management'' only for farm managers in nonfamily farming operations 
seeking to qualify two or three farm managers. The requirements for 
such farm managers clarify that eligible management activities are 
critical actions performed under one or more of the following 
categories:
     Capital, land, and safety-net programs: Arrange financing, 
manage capital, acquire equipment, negotiate land acquisition and 
leases, 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 management activities described place emphasis on actions taken 
or performed by the person directly for the benefit and success of the 
farming operation. Passive management activities such as attendance of 
board meetings or conference calls, or watching commodity markets or 
input markets (without making trades), are not considered as making a 
significant contribution of active personal management. Only critical 
actions as specified in the new definition of ``active personal 
management'' are counted towards the required hourly threshold for a 
significant contribution of active personal management.
    As required by the 2014 Farm Bill, the new definition and 
requirements in the final rule take into account the size and 
complexity of farming operations across all parts of the country. The 
final rule also takes into consideration all of the actions of the 
farming operation associated with the financing; crop selection and 
planting decisions; land acquisitions and retention of the land assets 
for an extended period of time; risk management and crop insurance

[[Page 78122]]

decisions; purchases of inputs and services; utilization of the most 
efficient field practices; and prudent marketing decisions. 
Furthermore, this new definition takes into account advancements in 
farming, communication, and marketing technologies that producers must 
avail themselves to remain competitive and economically viable 
operations in today's farming world.
    Eligible management activities include the activities required for 
the farming operation as a whole, not just activities for the programs 
to which the ``actively engaged in farming'' requirement applies. For 
example, if a farming operation is participating in ARC or PLC and 
using grain produced under those programs to feed dairy cattle, those 
management activities with respect to the dairy component of the 
operation can be considered for eligibility purposes to qualify a farm 
manager. Similarly, if a farming operation receives MLG or LDPs on some 
crops, but not on others, all the management activities for all the 
crops are considered for eligibility purposes.
    The final rule clarifies that the significant contribution of a 
person's active management may be used only to qualify one person or 
legal entity in a farming operation as meeting the requirements of 
being actively engaged in farming. For example, if members of a joint 
operation are entities, one person's contribution will only count 
toward qualifying one of the entities (and not any other entity to 
which the person belongs), as actively engaged in farming.

Summary of Comments Received and FSA Responses

    The 60 day comment period on the proposed rule ended May 26, 2015. 
CCC received 95 comments on the proposed rule. Comments were received 
from individual farmers, members of the public, slow food and 
sustainable agriculture groups, environmental groups, rural advocacy 
groups, the USDA Office of the Inspector General, an FSA employee, and 
groups representing farmers and growers. Most of the comments supported 
the idea of restricting eligibility for farm payments, but many of 
those supportive comments also suggested additional restrictions on 
eligibility. The rest of the comments, primarily from groups 
representing farmers and growers, did not support restricting 
eligibility for farm payments based on active contribution of 
management, or suggested that additional persons be made eligible for 
payment.
    Many of the suggestions to further restrict farm program payments 
were out of scope or exceed FSA's authority. For example, some 
commenters objected to the family member operation exemption that is 
required by the 2014 Farm Bill. The suggestion of one payment limit per 
farm, no exceptions, would eliminate the spouse exemption for actively 
engaged in farming, which FSA does not have authority to change. Other 
suggestions were good ideas that are already addressed by existing 
regulations. For example, the attribution rules already specified in 7 
CFR part 1400 prevent one person from earning multiple payment 
limitations based on their participation in multiple farming 
enterprises.
    The following discussion summarizes the issues raised by 
commenters, and FSA's responses to those comments as reflected in this 
rule:

Family Members and Family Farm Exemptions

    Comment: The new requirements on the contribution of active 
personal management should be applied to all farming operations 
including family operations as a matter of clarity and equity.
    Response: Section 1604(c) of the 2014 Farm Bill specifically states 
that any revisions to the actively engaged in farming provisions will 
not apply to farming operations comprised entirely of family members. 
Therefore, no change to the rule is made in response to this comment.
    Comment: The definition of family member should be extended an 
additional generation to great great grandchildren.
    Response: If such a familial relationship of great great 
grandparent and great great grandchild is represented between members 
in the same farming operation, who are both currently members at the 
same time of such farming operation, this would fall under the existing 
definition of family member because the great great grandchild is a 
lineal descendant of the great great grandparent and would therefore be 
recognized as such by the FSA reviewing authority. No revision to the 
rule or handbooks is needed to accommodate five generations within the 
same farming operation in the application of this rule.
    Comment: FSA should interpret the definition of family member to 
include cousins, nieces, nephews, aunts, and uncles. While not lineal 
descendants, an extended family relationship exists between such 
individuals that many times are involved in the same farming 
operations.
    Response: The existing definition of family member in 7 U.S.C. 1308 
is centered on the term lineal descendant. FSA does not have authority 
to revise the current definition of family member in 7 CFR part 1400 
and therefore, cousin, niece, nephew, aunt, and uncle will not be 
included or considered to be included as a family member under the 
current definition. No change is made to the definition of ``family 
member.''
    Comment: The changing legal landscape regarding definitions of 
marriage, and the effect, if any, it has on the related definitions 
within the rule, should be considered for this rule.
    Response: The text in 7 CFR part 1400 refers only to ``spouse'' and 
has no reference to husbands or wives. No revisions to the regulations 
are necessary to address the issue of marriage equality.
    Comment: Given the importance now placed on family members for 
operations to meet specific payment eligibility requirements, 
clarification is needed regarding the continuity of a farming 
operation's eligibility and the immediate consequences of unplanned 
events such as death, incapacitation, or forced retirement of a family 
member that otherwise negates this family relationship amongst all 
members. (For example, a grandparent retires from the operation, and 
one of the grandchildren remaining is a cousin but not a lineal 
descendent or sibling of any other remaining members.) Furthermore, FSA 
should consider a ``grandfather clause'' for existing members of a 
family farming operation (non-lineal descendants) that have succeeded 
former members due to death or retirement of a parent or grandparent.
    Response: Current regulation and FSA policy as specified in the 
handbooks provide that if an individual is determined to be actively 
engaged in farming and is otherwise eligible to receive program 
benefits subsequently dies or becomes incapacitated and is no longer 
able to make contributions to the farming operation, that person is 
considered to be actively engaged in farming and eligible for the 
duration of the program year. Consistent with this policy, eligibility 
determinations for a farming operation and its members for a specific 
program year, and that are dependent upon the family member exemption, 
will remain effective for the entire program year regardless of when 
the death, disability, or incapacitation of a family member occurred 
during the same program year. Then, for the following program year, new 
determinations for payment eligibility and payment limitation purposes 
will be made by FSA based on the

[[Page 78123]]

representations made by the farming operation, and its members, and 
applicable rules in effect at that time.
    Regarding ``grandfathering'' existing members of a farming 
operation, as noted above, the eligibility of a particular person or 
operation is effective for a program year. No other accommodations for 
additional years will be adopted or allowed based on the historical 
relationship of an operation's former members, because we do not have 
the authority to do so. The definition of ``family member'' as 
specified in 7 U.S.C. 1308 specifies that a family member is one to 
whom ``a member in the farming operation is related as lineal ancestor, 
lineal descendant, sibling, spouse, or otherwise by marriage.'' The 
plain language meaning of the authority is that a family member is one 
who is currently related to another member of the farming operation, 
and does not include a historical relationship for one who was related 
to someone who was formerly in the farming operation. Therefore, no 
change to the rule is made in response to this comment.

Implementation Timing

    Comment: If the rule is making the changes in requirements for 
certain producers' eligibility effective for the 2016 crop year, we 
will have only a few months to potentially reorganize a farm operation 
to come into compliance. The effective date for the implementation of 
all changes to the actively engaged in farming provisions should be 
postponed until at least the 2017 crop year.
    Response: There is no requirement that a farm operation needs to be 
reorganized to come into compliance with the rule changes; the rule 
changes how many payment limitations the farming operation may qualify 
for based on managers' activities and the size and complexity of the 
farming operation. We have considered the implementation timing and 
made a change in the in response to this comment and will make the rule 
effective for the 2016 crop year for producers who only have spring 
planted covered crops and loan commodity crops and effective for the 
2017 crop year for producers who have both spring and fall planted 
covered crops and loan commodity crops.

Definitions

    Comment: Although we are in agreement to FSA's new definition of 
active person management and the categories of management activities, 
FSA should include all of the management activities found in the Joint 
Explanatory Statement of the Committee of Conference (commonly referred 
to as the Managers' Report) on the 2014 Farm Bill.
    Response: FSA handbook instructions will be revised to include a 
list of all eligible management activities. The rule specifies the 
categories, and the handbook provides more details, so the categories 
are applied consistently. Therefore, no change to the rule is made in 
response to this comment.
    Comment: The phrase ``critical to the profitability of a farming 
operation'' used in the description of a significant contribution of 
active person management should be defined in the final rule.
    Response: The proposed rule outlined the three specific categories 
of management activities that will be considered as a contribution of 
active personal management and used in determining whether the person 
or member has made a significant contribution of active personal 
management. Although not explicitly stated, it must be understood that 
to be successful in farming, the timing of those management activities 
is critical and the failure to make a management decision or failing to 
take a management action, may make a difference in a farming operation 
remaining viable. So unless those specific management activities are 
timely completed by the person or member of a farming operation, the 
person or member will not only be considered to not meet the 
requirements to be determined actively engaged in farming, but also 
that such a failure of the person or member to timely perform the 
specified management activities would adversely affect the viability 
and continued existence of the farming operation itself. Therefore, we 
believe that the term critical is being used in the normal dictionary 
definition and an additional regulatory definition is not necessary.
    Comment: Rather than 500 hours or at least 25 percent of the total 
management needed for the farming operation, the new measurable 
standard for management should be increased to 1,000 hours or 50 
percent, equal to the existing labor contribution requirement.
    Response: Various proposals and concepts were considered in the 
development of this rule, including a minimum level of interest a 
person must hold in a farming operation before the person could qualify 
as actively engaged in farming with only an active personal management 
contribution, a weighted ranking of critical activities performed, 
Internal Revenue Service tax code requirements for a person to be 
considered a material participant in a business to claim a percentage 
of profit or loss from the business for personal income tax purposes, 
ARMS data of average size farming operations, and a higher hourly 
threshold, such the current hourly standard for active personal labor. 
The 500 hour or 25 percent standard was chosen because the ARMS found 
that generally in a farming operation, at least twice the amount of 
hours is devoted to labor activities as compared to the performance of 
actual management activities. Therefore, we are not making a change in 
the regulation in response to this comment.
    Comment: A numerical standard is not suitable to be applied at all 
to the performance of management activities.
    Response: The Managers' Report on the 2014 Farm Bill specifically 
directed the Secretary in implementing Section 1604 to develop clear 
and objective standards that can easily be measured and accounted for 
by members of the farming operation. In the absence of a consensus on 
an alternative standard for measuring a management contribution, the 
numerical standard from the proposed rule was adopted in the final 
rule. A numerical standard meets the requirements for being clear and 
objective, as well as easily measured and accounted for. Therefore, we 
are not making a change in the regulation.
    Comment: An equitable, measurable standard of significance should 
be one that combines both labor and management contributions due to the 
difficulty at times of deciding whether an activity or action is labor 
or management.
    Response: We have revised the rule in response to this comment to 
address the issue of a combined significant contribution of management 
and labor for farming operations that are subject to the new Subpart G. 
The existing regulations in 1400.3(b)(4) specify how such a combined 
significant contribution can meet the requirements of actively engaged 
in farming for operations that are not subject to new subpart G, where 
the activity is primarily labor or primarily management. This rule 
specifies a new measurable standard for a significant contribution of 
the combination of active personal labor and active personal management 
to a farming operation that is subject to subpart G that takes into 
account the reality of most farming operations where a person or member 
contributes not just labor or just management, but contributes a 
combination of both.
    The new standard for a contribution of the combination of active 
personal labor and active personal management balances these realities 
and establishes a minimum hourly requirement based

[[Page 78124]]

on the existing hourly standard for a significant contribution of 
active personal labor of 1,000 hours and the new hourly standard 
adopted for a significant contribution of active personal management of 
500 hours. However, the threshold for a significant contribution of 
combined labor and management is based on the proportionate share of 
the person's or member's combined contribution of both labor and 
management activities performed. Accordingly, under a combination of 
labor and management, the labor contribution is counted towards the 
existing 1,000 hours threshold for labor, and the management 
contribution is counted towards the 500 hours threshold for management. 
Because the rule establishes a combined limit for the combination of 
both labor and management, the minimum contribution amounts for each 
component are less than their individual limits if such determination 
would be made based on their sole contribution of labor (1000 hours) or 
management (500 hours) alone and the contributions under the 
combination are weighted to the activity that is greatest.
    There are 5 total hourly thresholds for a significant contribution 
of the combination of labor and management, based on a prorated 
combination of each type of contribution. For example, a combined 
contribution where the majority of the contribution is management is 
measured against a 550 total hour threshold that is weighted towards 
the 500 hour standard for management, whereas a combined contribution 
where the majority of the contribution is labor is measured against a 
950 total hour threshold that is weighted toward the 1,000 hours 
required for a significant contribution of labor.
    The following table specifies the hourly thresholds for the 
combined contribution of active personal labor and active personal 
management based on the proportionate share of both labor and 
management activities reported.

   Combination of Active Personal Labor and Active Personal Management
           Minimum Requirement for a Significant Contribution
                               [In hours]
------------------------------------------------------------------------
                                                    Meets the minimum
  Management contribution in         Labor            threshold for
            hours               contribution in        significant
                                     hours        contribution, in hours
------------------------------------------------------------------------
475..........................  75..............                      550
450..........................  100.............                      550
425..........................  225.............                      650
400..........................  250.............                      650
375..........................  375.............                      750
350..........................  400.............                      750
325..........................  425.............                      750
300..........................  550.............                      850
275..........................  575.............                      850
250..........................  600.............                      850
225..........................  625.............                      850
200..........................  650.............                      850
175..........................  675.............                      850
150..........................  800.............                      950
125..........................  825.............                      950
100..........................  850.............                      950
75...........................  875.............                      950
50...........................  900.............                      950
25...........................  925.............                      950
------------------------------------------------------------------------

    Under these weighted thresholds, two contributions of the same 
total contributed number of hours could have a different result, as it 
will depend upon how many hours of such total contribution are 
management and how many are labor. For example, a total combined 
contribution of 650 hours consisting of 250 hours of management and 400 
hours of labor would not qualify as a significant contribution, whereas 
a total combined contribution of 650 hours consisting of 400 hours of 
management and 250 hours of labor would qualify as a significant 
contribution.
    This standard will apply to each person that a farming operation 
requests to qualify as actively engaged in farming by making a 
significant contribution of the combination of labor and management, 
rather than only a significant contribution of management.
    This rule treats a combination of labor and management as a subset 
of the manager requirements. This new provision to clarify a combined 
significant contribution does not change the limit of three farm 
managers. As part of an entity seeking more than one payment limit for 
management, those farm managers qualifying because of a combination of 
labor and management are also covered by the new definition and 
recordkeeping requirements. In no case may more than three persons per 
farming operation qualify as actively engaged in farming based on a 
contribution of active personal management or a combination of labor 
and management activities.
    Comment: Section 1604 of the 2014 Farm Bill prohibits FSA from 
making changes or revisions to any of the existing regulations other 
than for the contribution of active personal management.
    Response: That is correct, and this rule does not change the 
measurable standard for the significant contribution of active personal 
labor, which remains at 1,000 hours or 50 percent of the labor required 
for the operation. The statute is clear and this rule changes the 
regulations only for a contribution of active personal management, 
including for a significant contribution of combined labor and 
management. The regulations that apply solely to a contribution of 
labor have not changed.
Restrictions on Active Personal Management Contributions
    Comment: No restriction should be placed on the number of persons 
that a farming operation is allowed to qualify

[[Page 78125]]

as actively engaged in farming with the significant contribution of 
management and no labor.
    Response: Section 1604 of the 2014 Farm Bill directs the Secretary 
to consider placing limits on the number of persons in a farming 
operation that may qualify as actively engaged in farming by only 
contributing management. Having no restriction would not address 
Section 1604. We considered various options while developing the 
proposed rule. As explained in the proposed rule, one option considered 
was a strict limit of one farm manager; however, we determined that it 
was reasonable to provide an option for a second and third farm manager 
in specific circumstances. The adoption of this restriction or limit 
addresses the 2014 Farm Bill provision while providing flexibility for 
large or complex operations. Therefore, no change to the rule is made 
in response to this comment.
    Comment: There should be only one additional manager, period, the 
same as included in the House and Senate farm bills. The total payment 
limit for a farm should be decoupled from the number of managers by 
setting a strict limit of one manager.
    Related comment: A non-family farm operation should not be allowed 
to exceed two eligible managers under any scenario.
    Response: Consideration was given to allowing only one manager, or 
two managers, per non-family farming operation for all circumstances. 
However, the 2014 Farm Bill contained requirements that consideration 
be given to other factors such as operation size and operation 
complexity. The decision was made to allow up to a total of three 
managers, but only with documentation of the need for the additional 
managers, based on both operation size and complexity. Therefore, no 
change to the rule is made in response to these comments.
    Comment: Restricting the number of managers completely negates the 
new definition of active personal management, and the removal of this 
restriction would provide flexibility for operations to adjust to the 
new management requirements and lessen the impact of implementation.
    Response: The new limit of one farm manager with exceptions for up 
to three farm managers is flexible and recognizes that many diverse 
farming operations and farming practices are in existence today and may 
require multiple persons in farm management roles. Therefore, no change 
to the rule is made in response to this comment.
    Comment: The standards for the allowance of additional managing 
members based in the operation's size and complexity are a recipe for 
abuse, permissiveness, and inconsistent application by COCs and STCs.
    Response: All COC and STC recommendations for variances to the 
established standards for operation size and complexity, and all 
approvals of requests for additional managing members in a farming 
operation, are subject to approval and concurrence by DAFP before 
implementation. In addition, there will be no instances in which more 
than three farm managers per operation will be allowed by DAFP. 
Therefore, no change to the rule is made in response to this comment.
    Comment: The new restriction of one contribution qualifies only one 
person or member in the farming operation is unreasonable because for 
liability or other purposes, a non-family manager may need to spread 
his or her management contributions over more than one entity or member 
to make all of them eligible for payment.
    Response: In this rule, one person's contribution of active 
personal management or a combination of management and labor can only 
qualify only one person or one legal entity as actively engaged. Aside 
from the spousal provision for actively engaged in farming that allows 
one spouse's actions to be used to qualify the other spouse as actively 
engaged, we have no statutory authority to permit the contributions of 
one person to qualify additional persons and legal entities that 
represent multiple payment limitations in the same farming operation. 
Furthermore, without this restriction, the tracking and measurement of 
actual contributions of labor or management being made to a farming 
operation would be difficult, if not elusive, to determine to any 
measurable level or degree of risk. Therefore, we are not making a 
change in the regulation.

Recordkeeping Requirements

    Comment: The requirement to keep a written log of the performance 
of management activities should be eliminated on the premise that such 
records would be overly burdensome to the members, disruptive to the 
workflow, and too expensive for an operation to maintain.
    Response: With the implementation of a measurable standard for the 
contribution of active personal management in hours or percentage of 
total hours expended in the farming operation, a written record or log 
of the performance of management activities is required from all 
members. These records are essential to enable county and State FSA 
committees to determine whether or not a significant contribution of 
specific management activities was performed to at least the minimum 
level necessary to qualify as a significant contribution as defined. 
Furthermore, the implementation of a measurable standard is meaningless 
in the absence of actual documentation to verify that the minimum level 
of the standard established has been met by the person who represents 
as meeting the standard. The new recordkeeping requirements apply only 
to joint operations and legal entities comprised of non-family members 
that are seeking to qualify more than one farm manager. Therefore, we 
are not making a change in the regulation.
    Comment: The 2014 Farm Bill had a provision that FSA develop and 
implement a plan to monitor compliance reviews to ensure producers' 
compliance to the provisions of part 1400. Why was that not 
specifically in the rule?
    Response: This requirement was already met prior to the 
implementation of the 2014 Farm Bill. FSA implemented an automated 
tracking system to record compliance review results and to monitor 
completion of compliance reviews in 2012. Review results and progress 
on the completion of compliance reviews for the 2009 through 2013 
program years are currently being tracked. The United States Government 
Accountability Office (GAO) used FSA's tracking system in completion of 
the most recent audit of payment eligibility and payment limitation 
provisions (GAO 13-781, ``Farm Programs: Changes Are Needed to 
Eligibility Requirements for Being Actively Involved in Farming,'' 
September 2013). The current regulations in 7 CFR 1400.2(h) already 
specify that compliance reviews of farming operations and corresponding 
documentation may be conducted at any time.
    To address this comment and further clarify the compliance review 
process, this final rule adds a new provision to 7 CFR 1400.2 to 
specify that the Deputy Administrator will periodically monitor the 
status of completion of the assigned compliance reviews, and take any 
actions deemed appropriate to ensure the timely completion of the 
reviews for payment eligibility and payment limitation compliance 
purposes.

General Comments

    Comment: This rule removes certain flexibilities to where many farm 
families will become less sustainable to the point

[[Page 78126]]

that they may lose their ability to participate in farm programs.
    Response: It is unclear how limiting the number of persons who may 
qualify for payment based solely on management will in any way reduce 
the sustainability of family farms. Furthermore, family farming 
operations are exempt from this rule. Therefore, no change to the rule 
is made in response to this comment.
    Comment: Farm policy must seriously address the aging farmer crisis 
and effective payment caps are one tool USDA has to address this issue.
    Response: Payment limits have been in place since the 1970s, and 
are not changed with this rule. The eligibility requirements for the 
receipt of farm program payments have been made more restrictive with 
each successive legislation to date. FSA does not have authority to 
modify the current payment limitations below what is specified in the 
2014 Farm Bill. We have outreach programs that target beginning 
farmers, and many of our programs have special provisions, such as fee 
waivers, to encourage beginning farmers.
    Comment: Lax payment limits allow big farms to outbid beginning 
farmers for land and leases. Limit or restrict the issuance of program 
payments to new and small farm operators only.
    Response: FSA does not have authority to implement such a 
restriction. However, the average Adjusted Gross Income (AGI) 
provisions first implemented under the Farm Security and Rural 
Investment Act of 2002 (Pub. L. 107-171, generally referred to as the 
2002 Farm Bill) and that remain, as amended by subsequent legislation, 
do restrict the payment eligibility of recipients with incomes above 
the specified AGI levels. As specified in 7 CFR 1400, persons with an 
AGI above the limit are not eligible for payments or benefits under ARC 
and PLC, price support programs including MAL and LDP, the Conservation 
Reserve Program, the Noninsured Crop Disaster Assistance Program, most 
FSA disaster assistance programs, and some conservation programs 
operated by the Natural Resources Conservation Service. Therefore, no 
change to the rule is made in response to this comment.
    Comment: Require any operation that reorganizes to qualify for the 
family farm exemption to wait 5 years following the effective date of 
this rule to qualify for the exemption.
    Response: The 2014 Farm Bill does not authorize such a provision. 
The 2014 Farm Bill requires that this rule not apply to any farming 
operation comprised entirely of family members, and with no such 
waiting period. Therefore, no change to the rule is made in response to 
this comment.
    Comment: FSA's failure to evaluate the effects of this proposal on 
the environment would violate the National Environmental Policy Act 
(NEPA, 42 U.S.C. 4321-4347), current FSA regulations, and would be 
arbitrary, capricious, an abuse of discretion, and contrary to the law 
under the Administrative Procedure Act (5 U.S.C. 553).
    Response: FSA has evaluated the effects of this proposal and 
determined that this final rule does not constitute a major Federal 
action that would significantly affect the quality of the human 
environment, individually or cumulatively. Therefore, FSA will not 
prepare an environmental assessment or environmental impact statement 
for this regulatory action.

Effective Date

    The Administrative Procedure Act (5 U.S.C. 553) provides generally 
that before rules are issued by Government agencies, the rule is 
required to be published in the Federal Register, and the required 
publication of a substantive rule is to be not less than 30 days before 
its effective date. One of the exceptions is when the agency finds good 
cause for not delaying the effective date. Subsection 1601(c)(2) of the 
2014 Farm Bill makes this final rule exempt from notice and comment. 
Therefore, using the administrative procedure provisions in 5 U.S.C. 
553, FSA finds that there is good cause for making this rule effective 
less than 30 days after publication in the Federal Register. This rule 
allows FSA to make the changes to the actively engaged regulations in 
time for the new 2016 program year. Therefore, this final rule is 
effective when published in the Federal Register.

Executive Orders 12866 and 13563

    Executive Order 12866, ``Regulatory Planning and Review,'' and 
Executive Order 13563, ``Improving Regulation and Regulatory Review,'' 
direct agencies to assess all costs and benefits of available 
regulatory alternatives and, if regulation is necessary, to select 
regulatory approaches that maximize net benefits (including potential 
economic, environmental, public health and safety effects, distributive 
impacts, and equity). Executive Order 13563 emphasizes the importance 
of quantifying both costs and benefits, of reducing costs, of 
harmonizing rules, and of promoting flexibility.
    The Office of Management and Budget (OMB) designated this rule as 
significant under Executive Order 12866, ``Regulatory Planning and 
Review,'' and therefore, OMB has reviewed this rule. The costs and 
benefits of this final rule are summarized below. The full cost benefit 
analysis is available on regulations.gov.

Summary of Economic Impacts

    About 3,200 joint operations could lose eligibility for around $106 
million in total crop year 2016 to 2018 benefits from the PLC, ARC, and 
MAL Programs. The largest savings, around $38 million, are projected 
for both the 2016 and 2017 crops (note that the exemption for 
operations with fall plantings ends with the 2016 crops). Savings are 
projected to decline to around $29 million for the 2018 crop if prices 
improve, and in that case, producers would be eligible for lower 
benefits from the MAL, LDP, ARC, and PLC Programs, independent of the 
requirements of this rule. These savings can also be viewed as a cost 
of this rule for producers. This rule does not change the payment limit 
per person, which is a joint $125,000 for the applicable programs. As 
specified in the current regulations, the payment limits apply to 
general partnerships and joint ventures (collectively referred to as 
joint operations) based on the number of eligible partners in the joint 
operation; each partner may qualify the joint operation for a payment 
of up to $125,000. In other words, each person in the joint operation 
who loses eligibility due to this rule will lose eligibility for up to 
$125,000 in payments for the joint operation.
    Other types of entities (such as corporations and limited liability 
companies) that share a single payment limit of $125,000, regardless of 
their number of owners, would not have their payments reduced by this 
rule. Each owner must contribute management or labor to the operation 
to qualify the operation to receive the member's share of the single 
payment limit.
    No entities comprised solely of family members will be impacted by 
this rule.
    If commodity prices are sufficiently high that few producers are 
eligible for any benefits, the costs of this rule to producers (and 
savings to USDA) would be less, possibly even zero. That is, if very 
few joint operations were to earn farm program payments due to high 
commodity prices, limiting eligibility on the basis of management 
contributions would not have much impact. Government costs for 
implementing this rule are expected to be minimal ($0.4 million). The 
applicable joint operations' opportunity costs associated with keeping 
management logs over the course of each year are expected to be about 
$7 million, but that amount could

[[Page 78127]]

decline over time as managers standardize their recordkeeping.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (5 U.S.C. 601-612), as amended by 
the Small Business Regulatory Enforcement Fairness Act of 1996 
(SBREFA), generally requires an agency to prepare a regulatory analysis 
of any rule whenever an agency is required by APA or any other law to 
publish a rule, unless the agency certifies that the rule will not have 
a significant economic impact on a substantial number of small 
entities. This final rule will not have a significant impact on a 
substantial number of small entities. The farming operations of small 
entities generally do not have multiple members that contribute only 
active personal management to meet the requirements of actively engaged 
in farming.

Environmental Review

    The environmental impacts of this final rule have been considered 
in a manner consistent with the provisions of NEPA, the regulations of 
the Council on Environmental Quality (40 CFR parts 1500-1508), and the 
FSA regulations for compliance with NEPA (7 CFR part 799). The 
Agricultural Act of 2014 (the 2014 Farm Bill) requires that USDA 
publish a regulation to specifically define a ``significant 
contribution of active personal management'' for the purposes of 
determining payment eligibility. This regulation clarifies the 
activities that qualify as active personal management and the 
recordkeeping requirements to document eligible management activities. 
This rule is making a mandatory administrative clarification. As such, 
FSA has determined that this final rule does not constitute a major 
Federal action that would significantly affect the quality of the human 
environment, individually or cumulatively. Therefore, FSA will not 
prepare an environmental assessment or environmental impact statement 
for this regulatory action.

Executive Order 12372

    Executive Order 12372, ``Intergovernmental Review of Federal 
Programs,'' requires consultation with State and local officials that 
would be directly affected by proposed Federal financial assistance. 
The objectives of the Executive Order are to foster an 
intergovernmental partnership and a strengthened Federalism, by relying 
on State and local processes for State and local government 
coordination and review of proposed Federal financial assistance and 
direct Federal development. For reasons specified in the final rule 
related notice regarding 7 CFR part 3015, subpart V (48 FR 29115, June 
24, 1983), the programs and activities in this rule are excluded from 
the scope of Executive Order 12372.

Executive Order 12988

    This final rule has been reviewed under Executive Order 12988, 
``Civil Justice Reform.'' This rule will not preempt State or local 
laws, regulations, or policies unless they represent an irreconcilable 
conflict with this rule. This rule will not have retroactive effect. 
Before any judicial actions may be brought regarding the provisions of 
this rule, the administrative appeal provisions of 7 CFR parts 11 and 
780 are to be exhausted.

Executive Order 13132

    This final rule has been reviewed under Executive Order 13132, 
``Federalism.'' The policies contained in this rule would not have any 
substantial direct effect on States, on the relationship between the 
Federal government and the States, or on the distribution of power and 
responsibilities among the various levels of government, except as 
required by law. Nor would this rule impose substantial direct 
compliance costs on State and local governments. Therefore consultation 
with the States is not required.

Executive Order 13175

    This final rule has been reviewed in accordance with the 
requirements of Executive Order 13175, ``Consultation and Coordination 
with Indian Tribal Governments.'' Executive Order 13175 requires 
Federal agencies to consult and coordinate with tribes on a government-
to-government basis on policies that have tribal implications, 
including regulations, legislative comments or proposed legislation, 
and other policy statements or actions that have substantial direct 
effects on one or more Indian tribes, on the relationship between the 
Federal Government and Indian tribes or on the distribution of power 
and responsibilities between the Federal Government and Indian tribes.
    FSA has assessed the impact of this final rule on Indian tribes and 
determined that this rule would not, to our knowledge, have tribal 
implications that require tribal consultation under Executive Order 
13175. If a Tribe requests consultation, FSA will work with the USDA 
Office of Tribal Relations to ensure meaningful consultation is 
provided where changes, additions, and modifications identified in this 
rule are not expressly mandated by the 2014 Farm Bill.

Unfunded Mandates

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, Pub. L. 
104-4) requires Federal agencies to assess the effects of their 
regulatory actions on State, local, and Tribal governments or the 
private sector. Agencies generally must prepare a written statement, 
including cost benefits analysis, for proposed and final rules with 
Federal mandates that may result in expenditures of $100 million or 
more in any 1 year for State, local or Tribal governments, in the 
aggregate, or to the private sector. UMRA generally requires agencies 
to consider alternatives and adopt the more cost effective or least 
burdensome alternative that achieves the objectives of the rule. This 
final rule contains no Federal mandates, as defined in Title II of 
UMRA, for State, local and Tribal governments or the private sector. 
Therefore, this rule is not subject to the requirements of sections 202 
and 205 of UMRA.

Federal Domestic Assistance Programs

    The title and number of the programs in the Catalog of Federal 
Domestic Assistance to which this rules applies are: 10.051 Commodity 
Loans and Loan Deficiency Payments; 10.112 Price Loss Coverage; and 
10.113 Agriculture Risk Coverage.

Paperwork Reduction Act

    The regulations in this final rule are exempt from requirements of 
the Paperwork Reduction Act (44 U.S.C. Chapter 35), as specified in 
Section 1601(c)(2)(B) of the 2014 Farm Bill, which provides that these 
regulations be promulgated and administered without regard to the 
Paperwork Reduction Act. Section 1604 of the Farm Bill requires us to 
ensure that any additional paperwork required by this rule be limited 
only to persons who are subject to this rule. The additional recording 
and recordkeeping requirements of this final rule will only apply to 
persons who are claiming eligibility for payments based on a 
significant contribution of active personal management or a combination 
of labor and management to the farming operation.

E-Government Act Compliance

    FSA is committed to complying with the E-Government Act, to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.

[[Page 78128]]

List of Subjects in 7 CFR Part 1400

    Agriculture, Loan programs-agriculture, Conservation, Price support 
programs.

    For the reasons discussed above, CCC amends 7 CFR part 1400 as 
follows:

PART 1400--PAYMENT LIMITATION AND PAYMENT ELIGIBILITY

0
1. The authority citation for part 1400 continues to read as follows:

    Authority: 7 U.S.C. 1308, 1308-1, 1308-2, 1308-3, 1308-3a, 1308-
4, and 1308-5.


Sec.  1400.1  [Amended]

0
2. In Sec.  1400.1(a)(8), remove the words ``C and D'' and add the 
words ``C, D, and G'' in their place.
0
3. Amend Sec.  1400.2 by adding paragraph (i) to read as follows:


Sec.  1400.2  Administration

* * * * *
    (i) The Deputy Administrator will periodically monitor the status 
of completion of assigned compliance reviews and take any actions 
deemed appropriate to ensure timely completion of reviews for payment 
eligibility and payment limitation compliance purposes.

0
4. Add subpart G to read as follows:

Subpart G--Additional Payment Eligibility Provisions for Joint 
Operations and Legal Entities Comprised of Non-Family Members or 
Partners, Stockholders, or Persons With an Ownership Interest in the 
Farming Operation
Sec.
1400.600 Applicability.
1400.601 Definitions.
1400.602 Restrictions on active personal management contributions.
1400.603 Recordkeeping requirements.

Subpart G--Additional Payment Eligibility Provisions for Joint 
Operations and Legal Entities Comprised of Non-Family Members or 
Partners, Stockholders, or Persons With an Ownership Interest in 
the Farming Operation


Sec.  1400.600  Applicability.

    (a) This subpart is applicable to all of the programs as specified 
in Sec.  1400.1 and any other programs as specified in individual 
program regulations.
    (b) The requirements of this subpart will apply to farming 
operations for FSA program payment eligibility and limitation purposes 
as specified in subparts B and C of this part.
    (c) The requirements of this subpart do not apply to farming 
operations specified in paragraph (b) of this section if either:
    (1) All persons who are partners, stockholders, or persons with an 
ownership interest in the farming operation or of any entity that is a 
member of the farming operation are family members as defined in Sec.  
1400.3; or
    (2) The farming operation is seeking to qualify only one person as 
making a significant contribution of active personal management, or a 
significant contribution of the combination of active personal labor 
and active personal management, for the purposes of qualifying only one 
person or entity as actively engaged in farming.


Sec.  1400.601  Definitions.

    (a) The terms defined in Sec.  1400.3 are applicable to this 
subpart and all documents issued in accordance with this part, except 
as otherwise provided in this section.
    (b) The following definitions are also applicable to this subpart:
    Active personal management means personally providing and 
participating in management activities considered critical to the 
profitability of the farming operation and performed under one or more 
of the following categories:
    (i) Capital, which includes:
    (A) Arranging financing and managing capital;
    (B) Acquiring equipment;
    (C) Acquiring land and negotiating leases;
    (D) Managing insurance; and
    (E) Managing participation in USDA programs;
    (ii) Labor, which includes hiring and managing of hired labor; and
    (iii) Agronomics and marketing, which includes:
    (A) Selecting crops and making planting decisions;
    (B) Acquiring and purchasing crop inputs;
    (C) Managing crops (that is, whatever managerial decisions are 
needed with respect to keeping the growing crops living and healthy--
soil fertility and fertilization, weed control, insect control, 
irrigation if applicable) and making harvest decisions; and
    (D) Pricing and marketing of crop production.
    Significant contribution of active personal management means active 
personal management activities performed by a person, with a direct or 
indirect ownership interest in the farming operation, on a regular, 
continuous, and substantial basis to the farming operation, and meets 
at least one of the following to be considered significant:
    (i) Performs at least 25 percent of the total management hours 
required for the farming operation on an annual basis; or
    (ii) Performs at least 500 hours of management annually for the 
farming operation.
    Significant contribution of the combination of active personal 
labor and active personal management means a contribution of a 
combination of active personal labor and active personal management 
that:
    (i) Is critical to the profitability of the farming operation;
    (ii) Is performed on a regular, continuous, and substantial basis; 
and
    (iii) Meets the following required number of hours:

   Combination of Active Personal Labor and Active Personal Management
           Minimum Requirement for a Significant Contribution
                               [In hours]
------------------------------------------------------------------------
                                                    Meets the minimum
  Management contribution in         Labor            threshold for
            hours               contribution in        significant
                                     hours        contribution, in hours
------------------------------------------------------------------------
475..........................  75..............                      550
450..........................  100.............                      550
425..........................  225.............                      650
400..........................  250.............                      650
375..........................  375.............                      750
350..........................  400.............                      750
325..........................  425.............                      750

[[Page 78129]]

 
300..........................  550.............                      850
275..........................  575.............                      850
250..........................  600.............                      850
225..........................  625.............                      850
200..........................  650.............                      850
175..........................  675.............                      850
150..........................  800.............                      950
125..........................  825.............                      950
100..........................  850.............                      950
75...........................  875.............                      950
50...........................  900.............                      950
25...........................  925.............                      950
------------------------------------------------------------------------

Sec.  1400.602  Restrictions on active personal management 
contributions.

    (a) If a farming operation includes any nonfamily members as 
specified under the provisions of Sec.  1400.201(b)(2) and (3) and the 
farming operation is seeking to qualify more than one person as 
providing a significant contribution of active personal management, or 
a significant contribution of the combination of active personal labor 
and active personal management, then:
    (1) Each such person must maintain contemporaneous records or logs 
as specified in Sec.  1400.603; and
    (2) Subject to paragraph (b) of this section, if the farming 
operation seeks not more than one additional person to qualify as 
providing a significant contribution of active personal management, or 
a significant contribution of the combination of active personal labor 
and active personal management, because the operation is large, then 
the operation may qualify for one such additional person if the farming 
operation:
    (i) Produces and markets crops on 2,500 acres or more of cropland;
    (ii) Produces honey with more than 10,000 hives; or
    (iii) Produces wool with more than 3,500 ewes; and
    (3) If the farming operation seeks not more than one additional 
person to qualify as providing a significant contribution of active 
personal management, or a significant contribution of the combination 
of active personal labor and active personal management, because the 
operation is complex, then the operation may qualify for one such 
additional person if the farming operation is determined by the FSA 
state committee as complex after considering the factors described in 
paragraphs (a)(3)(i) and (ii) of this section. Any determination that a 
farming operation is complex by an FSA state committee must be reviewed 
and DAFP must concur with such determination for it to be implemented. 
To demonstrate complexity, the farming operation will be required to 
provide information to the FSA state committee on the following:
    (i) Number and type of livestock, crops, or other agricultural 
products produced and marketing channels used; and
    (ii) Geographical area covered.
    (b) FSA state committees may adjust the limitations described in 
paragraph (a)(2) of this section up or down by not more than 15 percent 
if the FSA state committee determines that the relative size of farming 
operations in the state justify making a modification of either or both 
of these limitations. If the FSA state committee seeks to make a larger 
adjustment, then DAFP will review and may approve such request.
    (c) If a farming operation seeks to qualify a total of three 
persons as providing a significant contribution of active personal 
management, or a significant contribution of the combination of active 
personal labor and active personal management, then the farming 
operation must demonstrate both size and complexity as specified in 
paragraph (a) of this section.
    (d) In no case may more than three persons in the same farming 
operation qualify as providing a significant contribution of active 
personal management, or a significant contribution of the combination 
of active personal labor and active personal management, as defined by 
this subpart.
    (e) A person's contribution of active personal management, or the 
contribution of the combination of active personal labor and active 
personal management, to a farming operation specified in Sec.  
1400.601(b) will only qualify one member of that farming operation as 
actively engaged in farming as defined in this part. Other individual 
persons in the same farming operation are not precluded from making 
management contributions, except that such contributions will not be 
recognized as meeting the requirements of being a significant 
contribution of active personal management.


Sec.  1400.603  Recordkeeping requirements.

    (a) Any farming operation requesting that more than one person 
qualify as making a significant contribution of active personal 
management, or a significant contribution of the combination of active 
personal labor and active personal management, must maintain 
contemporaneous records or activity logs for all persons that make any 
contribution of any management to a farming operation under this 
subpart that must include, but are not limited to, the following:
    (1) Location where the management activity was performed; and
    (2) Time expended and duration of the management activity 
performed.
    (b) To qualify as providing a significant contribution of active 
personal management each person covered by this subpart must:
    (1) Maintain these records and supporting business documentation; 
and
    (2) If requested, timely make these records available for review by 
the appropriate FSA reviewing authority.
    (c) If a person fails to meet the requirement of paragraphs (a) and 
(b) of this section, then both of the following will apply:
    (1) The person's contribution of active personal management as 
represented to the farming operation for payment

[[Page 78130]]

eligibility purposes will be disregarded; and
    (2) The person's payment eligibility will be re-determined for the 
applicable program year.

Val Dolcini,
Executive Vice President, Commodity Credit Corporation, and 
Administrator, Farm Service Agency.
[FR Doc. 2015-31532 Filed 12-15-15; 8:45 am]
BILLING CODE 3410-05-P