Can You Defer ARC/PLC Payments?

I continue to get questions regarding whether you are allowed to defer 2014 ARC / PLC payments received in 2015 to 2016.  The confusion relates to the misconception that these payments qualify as crop insurance proceeds.  These payments are agricultural program payments.  Crop insurance proceeds related to yield losses are allowed to be deferred one year if the farmer normally sells more than 50% of his crops in the year after harvest.  If the farmer receives his crop insurance proceeds in the year after the claim arises, there is no additional deferral allowed.

As an example, assume Farmer Bean has a claim for the 2015 crop of $50,000.  $40,000 of this claim related to yield losses and $10,000 related to price losses.  He is allowed to defer $40,000 of the claim to 2016.  If he collects the $50,000 in 2016, he cannot defer any of the proceeds to 2017.

In the case of ARC/PLC payments, these are not crop insurance payments and thus farmers do not qualify for any deferral.  Even if they qualified as crop insurance payments, they will still not qualify for any deferral since the farmer received 2014 ARC/PLC payments in 2015.  They have already gotten the one-year deferral that they might be allowed as crop insurance proceeds.

Therefore, the bottom line is ARC/PLC payments are taxable in the year that the farmer receives them.

Paul Neiffer, CPA