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Cotton News

May 31, 2024

By June 7th, 2024No Comments

Welcome to the May 31, 2024 issue of Cotton News, a service provided by Plains Cotton Growers Inc. for the cotton industry in the Texas High Plains and beyond.

Farm Bill 2024: Are You in the Arena or Sitting in the Cheap Seats?

By Kara Bishop

I’m considering turning off my Google alerts for the phrase “Farm Bill.”

Since the proposed legislation was voted out of committee last week, these have been the headlines from the press:

  • Farm Bill advances from U.S. House Ag Panel but faces a tough row to hoe
  • Vilsack Says House Proposal Threatens Farm Bill Coalition
  • Vilsack Outlines His Opposition to House Farm Bill
  • Farm Bill Clears US House Ag Committee, But Likely Won’t Get Widespread Congressional Support as Revision Process Continues

This is not an exhaustive list — there are loads more. This is the vibe and media pitch that everyone is inundated with right now. While it’s not wrong to report the ins and outs of the legislative process for something like the Farm Bill, the press tends to focus on the negative. The talking heads seem to focus on the negative. And it’s exhausting to read it all.

I can’t imagine what it’s like having to experience it as a producer trying to make a living when all you hear is:

  • “It’s never going to get passed out of the House.”
  • “The Senate will never compromise to pass this bill.”
  • “It’s going to be extended. There’s no way we have a farm bill in 2024.”

There’s always going to be noise that is irrelevant to action. There is always going to be someone weighing in from the sidelines not doing the work, sitting in the cheap seats issuing opinions without evidence. What’s frustrating, and even a little surprising, is that some of the Monday-morning quarterbacks on the 2024 Farm Bill are in agriculture.

On April 23, 1910, former president Theodore Roosevelt delivered one of the most powerful speeches in U.S. history while touring Europe. That day, 25,000 people packed the streets of Paris to hear him speak.

To sum up, it’s basically a rant on cynics looking down on people who try to make the world a better place. This is my favorite excerpt; taken from a sign I have in my office:

It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is not effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at best knows in the end the triumph of high achievement. And who at worst, if he fails, at least fails while daring greatly. So that his place shall never be with those cold and timid souls who neither know victory nor defeat.  

House Ag Committee Chair Glenn “GT” Thompson (R-PA) is in the arena. There are multiple Representatives and Senators in the arena fighting for farmers with him. And PCG stands with them.

We’ve had talking heads, politicians and some agriculture groups saying there will not be a farm bill this year. That we will have an extension. I mean, it’s bad enough that the media is beating that drum, but even some of our own are adding to the proverbial noise. It’s getting one-sided and loud.

I understand there are challenges and a million tiny pieces that must line up just perfectly right for the 2024 Farm Bill to become law. I understand that the reality on the ground is an uphill battle — hasn’t that been the case with almost every farm bill? What I don’t understand is why some are making it harder for our advocates by agreeing with the obstacles rather than rising above them. The naysayers need to believe.

Because what is told to the press and published on communication channels gets back to our lawmakers. And they need to believe, too. They need a little support and motivation from agriculture to keep fighting the good fight.

Because we have some vocal opponents. Some loud opponents to this House Ag Committee Farm Bill Proposal — including the secretary of the U.S. Department of Agriculture. Why would anyone feed their noise when we can make our own?

The answer to questions about the farm bill that just passed out of the House Ag Committee is simple: We need this farm bill. It’s a good bill. It’s bipartisan. (There were four democrats that voted it out of committee when all the noise said there might be one.) It provides an actual farm safety net that could do producers and industry alike some real good for the next five years. And we need it because we grow the food and fiber of the world in an abundant and safe way for everyone.

Let’s make some noise as believers.

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How Would New Payment Limit Work Under House Farm Bill Proposal?

Farm CPA Report with Paul Neiffer

The House Farm Bill proposal has an option to increase the payment limit from the current $125,000 to $155,000 beginning with the 2025 crop year and then index it to inflation. However, in order to qualify for the increase, your adjusted gross income (AGI) from farming must be greater than 75% compared to total AGI.

The wording of the bill indicates that this test is applied to an individual or entity but does not include the new “qualified pass-through” entity. Therefore, the test for any entity taxed as a partnership or S corporation will be determined at the owner level to see if either the $125,000 or $155,000 limit will apply.

Let’s look at some examples (these are based on a three-year average):

Gretchen has a Schedule F that shows $75,000 of net income including any related equipment gains on Form 4797. Her spouse shows $50,000 of wage income. As a couple, Gretchen would not qualify for the increased payment limit. However, she may get an attorney or CPA to write a letter indicating if she filed separately then she would qualify. But remember, the increased payment limit only helps if she has payments greater than $125,000.

Let’s assume that Gretchen is single and has Schedule F income of $65,000 and also works in town making $30,000. She would not qualify for the increased payment limit.

ABC Farm Corporation has $200,000 of farm income reported on a substitute Schedule F but has income of $100,000 from wind turbine leases. FSA considers all of this income to be farm income and would qualify for the increase.

ABC Farm Corporation has $500,000 of farm income, but also $200,000 of income from an investment in a non-farm activity. Since farm income is less than 75% of total income, then the corporation does not qualify for the increase.

Let’s assume that ABC Farm Corporation has four equal owners who all have farm AGI over 75%. Since this is an C corporation, the payment limit remains at $125/155,000. However, if it was an S corporation, its payment limit would be four times as high, however, it is likely there would be a reduction since all of the owners likely received farm program payments too. Remember, that the maximum is split between entities and owners to make sure the payments do not exceed the maximum allocated jointly between owners and entities.

As an example, assume that the corporation qualified for $500,000 of payments and each of the four owners qualified for $100,000 for total qualified payments of $900,000. The maximum that can be paid to the corporation and the four owners if $620,000 (4 X $155,000) and thus a pro-rata reduction would be applied.

XYZ Farms LLC has four equal owners. The LLC qualifies for $700,000 of payments, however, three of the owners have farm AGI less than 75%, therefore, the LLC will only receive $530,000 instead of the maximum $620,000 allowed if all four had farm AGI over 75%.

MNO Farms, a general partnership, qualifies for $1 million of farm program payments. It has 7 equal owners, however, none of them have farm AGI greater than 75%, therefore, the partnership will only receive $875,000 instead of the full $1 million if all were greater than 75%. Also, if any of the owners received a payment, then a pro-rata reduction would be applied to MNO payment too.

Now, let’s assume that MNO Farms only has four actively involved owners and the other three are not involved at all. Of the four actively involved farmers, three have farm AGI over 75% and one does not. In this case, the total amount of farm payments allowed is three @ $155,000 and one @ $125,000 or a total of $590,000. The three that are not involved removes those payment limits from the calculation. Also, pro-rata reduction may be applied to MNO.

As you can see, in some cases you will get the increase and in other cases you would not. However, this is just a proposal, and it will require the House to vote yes on it and for the Senate to agree. This likely will not happen but we may be pleasantly surprised.

We will keep you posted.

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