Cousins are not “family”
Farmers that sign up with the FSA for program payments have certain payment limitations that apply. Normally, if the farm operates as a partnership, there is no payment limitation at the partnership level. The payment limit is then applied at the partner level.
As an example, assume ABC partnership farms 10,000 acres in Iowa. The partnership is comprised of 6 equal partners and in a good year, the partnership will receive $500,000 of ARC-CO or PLC payments. There is no limit at the partnership level and the payment limit at the partner level is $125,000 per partner or a total of $750,000. Therefore, there is no limit on the amount of payments received.
However, the 2014 Farm Bill added certain new restrictions. If the ABC partnership is comprised of only family members, then there are no payment limits. Family is a lineal ancestor or descendent, a sibling, or anyone married to any of these. However, cousins, niece or nephew or aunt or uncle are no longer considered to be family.
If the partnership now has non-family members, then it is subject to the new “manager” rules. Under these rules, only up to 3 managers are allowed to receive payments. If the operation is under 2,500 acres and not complex, then only one payment is allowed. If it is over 2,500 acres and not complex, then two payments are allowed. If it is over 2,500 acres and complex, then three payments are allowed. In no case, can a non-family farm receive more than 3 payments.
In our example, assume the ABC partnership is no longer family and not complex. In this situation, it is allowed two payment limits and instead of receiving $500,000, it now only entitled to $250,000 or a loss of $250,000. If it is both large and complex, then it is entitled to three payments or $375,000.
With multiple generation farms becoming more of a norm, these new rules may start applying to more farm operations. If it might apply to you, make sure to review with your FSA advisor to see what your options might be. Perhaps one option is to split up the farm into two or more farm partnerships. This can be difficult.