The Second MFP – How Much Will You Not Collect?
The USDA today announced a second round of “Market Facilitation Program” payments based on the 2019 crops. Payments for non-specialty crops such as corn, soybeans, wheat, etc. will no longer be based on farmer’s actual production but will be a per acre payment based on the county where the farm is located. This should help prevent changes to planting intentions.
However, it does appear that farmers will actually need to plant crops in order to participate in the payments. This could affect some decisions on prevented planting.
The primary focus of this post is whether farmer’s will be able to collect all of the payments that they qualify for. The previous MFP program last year had the typical $125,000 payment limit per entity and the $900,000 AGI limit. We are not sure if those same payment and AGI limits will apply this year.
If so, many larger farmers structured as an LLC or other type of limited entity will only qualify for a maximum $125,000 payment. Whereas, a general partnership or joint venture will qualify for payments based on the number of partners in the partnership (or joint venture).
For example, assume you are cherry grower in Washington state and you operate as an S corporation. Based on your production, you qualify for a payment of $500,000, however, since you are an S corporation you only can receive $125,000. Now if you were a general partnership with four equal partners you could qualify for the full $500,000 (subject to the AGI limitations for each partner).
There likely will be many farmers in this situation assuming the limits are the same as last year’s MFP. We will keep you posted.
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.
Paul, What does this “2019 MFP payments based on 2019 planting not to exceed 2018 planting” mean? What does that mean for a new farmer this year or a new entity farming this year? Zero payment? Thank you, Tim