75% AGI From Farming is Good
The Market Facilitation Program enacted last year provided tariff relief for farmers. However, there was a provision that indicated farmers could not receive relief if their average AGI was greater than $900,000.
The disaster aid package that is expected to be signed by President Trump in the next week or so contains a change to this requirement. It still has the $900,000 AGI requirement, however, if at least 75% of AGI is from farming, then the $900,000 requirement is waived.
This means that as long as at least 75% of your income (for an entity or individual) is from farming, then a MFP payment of up to $125,000 is allowed.
I would guess that most farming entities will easily qualify for this new provision. However, many individual farmers who have a larger amount of outside non-farm income may not qualify. Here is an example:
Tom and Susan have a Schedule F farm that generates an average of $700,000 of income each year. Susan has a job paying a wage of $300,000 and Tom has an interest in an ethanol plant that generates AGI of $400,000 each year. Only 50% of their AGI is from farming, therefore, they would not qualify for any MFP payment.
If they did not have the ethanol income, they may be able to qualify if Tom is the sole owner of the farmer since a calculation of AGI assuming a separately filed tax return would result in 100% of AGI from farming for Tom.
This change was actively pursued by Washington cherry farmers and will help other farmers in this same situation.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
My AGI is under 900,000 but my Farm income is less than 75% of AGI. Do I qualify?