Congressional Efforts to Tighten Eligibility Criteria

The initial attempt to restrict payments to actual farmers was in 1987, when Congress enacted what is commonly known as the Farm Program Payments Integrity Act (Omnibus Budget Reconciliation Act of 1987, P.L. 100-203 , §§1301-1307). This law required that an individual or entity meet AEF criteria to receive farm commodity payments. Since their establishment, AEF criteria have been a requirement for payment eligibility for most farm revenue support programs. However, designing a transparent and comprehensive definition of what it means to be AEF has proven difficult. The 2014 farm bill ( P.L. In general, family farms receive special treatment in which every adult family member 18 years or older who receives income based on the farm's operating results is deemed to meet the AEF requirements. As a result, the current set of laws and rules governing farm program eligibility—particularly for family members of a farm operation—remain subject to considerable scrutiny and criticism from both rural and farm advocacy groups as well as certain Members of Congress. Critics contend that current USDA eligibility criteria—especially for providing active personal management—remain broad and subjective and may represent a low threshold to qualify for payments, thus facilitating the creation of partnership members to increase the farm business's payment limit and expand its farm payment receipts. Each member is treated separately and individually for purposes of determining eligibility and payment limits. Thus, a partnership's potential payment limit is equal to the number of qualifying members (plus any special exemptions such as spouses) times the individual payment limit. A legally defined association of joint owners or shareholders that is treated as a single person for purposes of determining eligibility and payment limits. The AEF requirements apply equally to U.S. citizens, resident aliens, and foreign entities. A person, as an individual producer, must meet the following three AEF criteria: 
P1. The person's share of profits or losses is commensurate with his/her contribution to the farming operation; and
P3. Exceptions for Landowners

An exception is also made for landowners who may forgo the AEF labor and management requirement and still be deemed in compliance with all AEF requirements if the landowner receives income based on the farm's operating results and, thus, shares in the risk of profits (P2) and losses (P3) from the crop. Failure to Meet AEF Criteria for a Person

Any person or legal entity that does not satisfy the AEF requirements will not be eligible for farm program benefits under relevant programs. It is considered as "actively engaged in farming" with respect to a farming operation if:
C1.The corporation makes a significant contribution of capital, equipment, or land (or a combination thereof);
C2.Each member with an ownership interest in the corporate entity makes a significant contribution of personal labor or active personal management—whether compensated or not—to the operation that are:
a. performed on a regular basis;
b. identifiable and documentable; and 
c. separate and distinct from such contributions of other members;
C3.The collective contribution of corporate members is significant and commensurate with contributions to the farming operation; and 
C4.The corporation also meets the AEF criteria cited above for a person of (P2) sharing commensurate profits or losses, and (P3) bearing commensurate risk. The 2014 farm bill (§1604) required USDA to add more specificity to the role that a nonfamily producer who is a member of a legal entity—primarily a partnership or joint venture—must play to qualify for farm program benefits. However, long-standing concerns remain that some farm operations are organized to overcome program payment limits and maximize the amount of their farm program payments. In particular, some advocacy groups suggest that USDA's new rule did not go far enough in tightening AEF criteria and that it continues to allow for a high number of farm managers and associated payment limits for both family and nonfamily farm operations.
In 1987, Congress enacted what is commonly known as the Farm Program Payments Integrity Act (Omnibus Budget Reconciliation Act of 1987, P.L. 100-203, §§1301-1307), which requires that an individual or legal entity be "actively engaged in farming" (AEF) to be eligible for federal commodity revenue support programs. AEF requirements apply equally to U.S. citizens, resident aliens, and foreign entities. Designing a transparent and comprehensive AEF definition has proven difficult and has evolved over the years. The current set of laws and rules governing farm program eligibility—for both family and nonfamily members on farm operations—remain subject to considerable scrutiny and criticism from both rural and farm advocacy groups as well as certain Members of Congress. In particular, critics contend that current U.S. Department of Agriculture (USDA) eligibility criteria—especially for providing active personal management—remain broad and subjective and may represent a low threshold to qualify for payments, thus facilitating the creation of new farm operation members simply to expand an operation's farm payment receipts.
Three major categories of legal entities are subject to AEF requirement for program payment eligibility: an individual, a partnership, and a corporation.
An individual must meet three specific AEF criteria. First, independently and separately from other individuals with an interest in the farm business, the person makes a significant contribution to the operation of: (a) capital, equipment, or land; and (b) active personal labor and/or active personal management. Second, the person's share of profits or losses is commensurate with his/her contribution to the farming operation. Third, the person shares in the risk of loss from the farming operation.
An individual that meets the AEF criteria is eligible for farm program payments but subject to annual payment limits. If a married person meets the AEF requirements, any spouse will also be considered to have met the AEF requirements, thus effectively doubling the individual payment limit. Also, every family member 18 years or older who receives income based on the farm's operating results is deemed to meet the AEF requirements and is eligible for a separate payment limit. Another exception to AEF requirements is made for landowners provided they receive income based on the farm's operating results.
A general partnership is an association of multiple persons whereby each member is treated separately and individually for purposes of determining eligibility and payment limits. A partnership's potential payment limit is equal to the limit for a single person times the number of persons or legal entities that comprise the operation's ownership and meet the AEF requirements. Thus, adding a new member can potentially provide an additional payment limit. A corporation is an association of joint owners that is treated as a single person for purposes of determining eligibility and payment limits, provided that the entity meets the AEF and other eligibility criteria. Adding a new member generally does not affect a corporation's payment limit but only increases the number of members that can share a single payment limit.
In accordance with a provision in the 2014 farm bill (P.L. 113-79; §1604), USDA added more specificity to the role that a nonfamily member of a partnership or joint venture must play to qualify for farm program benefits. However, considerable issues remain that may be of interest to Congress. Long-standing concerns remain that some farm operations are organized to overcome program payment limits and maximize the amount of their farm program payments. In particular, some advocacy groups suggest that USDA's new rule did not go far enough in tightening AEF criteria and that it continues to allow for a high number of farm managers and associated payment limits for both family and nonfamily farm operations.