
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 7USC1308-1]

 
                          TITLE 7--AGRICULTURE
 
             CHAPTER 35--AGRICULTURAL ADJUSTMENT ACT OF 1938
 
 SUBCHAPTER II--LOANS, PARITY PAYMENTS, CONSUMER SAFEGUARDS, MARKETING 
                   QUOTAS, AND MARKETING CERTIFICATES
 
  Part A--Definitions, Loans, Parity Payments, and Consumer Safeguards
 
Sec. 1308-1. Prevention of creation of entities to qualify as 
        separate persons; payments limited to active farmers
        

(a) Prevention of creation of entities to qualify as separate persons

    For the purposes of preventing the use of multiple legal entities to 
avoid the effective application of the payment limitations under section 
1308 of this title:

                           (1) In general

        A person (as defined in section 1308(5)(B)(i) of this title) 
    that receives farm program payments (as described in paragraphs (1) 
    and (2) of this section as being subject to limitation) for a crop 
    year may not also hold, directly or indirectly, substantial 
    beneficial interests in more than two entities (as defined in 
    section 1308(5)(B)(i)(II) of this title) engaged in farm operations 
    that also receive such payments as separate persons, for the 
    purposes of the application of the limitations under section 1308 of 
    this title. A person that does not receive such payments for a crop 
    year may not hold, directly or indirectly, substantial beneficial 
    interests in more than three entities that receive such payments as 
    separate persons, for the purposes of the application of the 
    limitations under section 1308 of this title.

                  (2) Minimal beneficial interests

        For the purpose of this subsection, a beneficial interest in any 
    entity that is less than 10 percent of all beneficial interests in 
    such entity combined shall not be considered a substantial 
    beneficial interest, unless the Secretary determines, on a case-by-
    case basis, that a smaller percentage should apply to one or more 
    beneficial interests to ensure that the purpose of this subsection 
    is achieved.

                    (3) Notification by entities

        To facilitate administration of this subsection, each entity 
    receiving such payments as a separate person shall notify each 
    individual or other entity that acquires or holds a substantial 
    beneficial interest in it of the requirements and limitations under 
    this subsection. Each such entity receiving payments shall provide 
    to the Secretary of Agriculture, at such times and in such manner as 
    prescribed by the Secretary, the name and social security number of 
    each individual, or the name and taxpayer identification number of 
    each entity, that holds or acquires a substantial beneficial 
    interest.

                    (4) Notification of interest

        (A) In general

            If a person is notified that the person holds substantial 
        beneficial interests in more than the number of entities 
        receiving payments that is permitted under this subsection for 
        the purposes of the application of the limitations under section 
        1308 of this title, the person immediately shall notify the 
        Secretary, designating those entities that should be considered 
        as permitted entities for the person for purposes of applying 
        the limitations. Each remaining entity in which the person holds 
        a substantial beneficial interest shall be subject to reductions 
        in the payments to the entity subject to limitation under 
        section 1308 of this title in accordance with this subparagraph. 
        Each such payment applicable to the entity shall be reduced by 
        an amount that bears the same relation to the full payment that 
        the person's beneficial interest in the entity bears to all 
        beneficial interests in the entity combined. Before making such 
        reductions, the Secretary shall notify all individuals or 
        entities affected thereby and permit them to adjust among 
        themselves their interests in the designated entity or entities.

        (B) Notice not provided

            If the person does not so notify the Secretary, all entities 
        in which the person holds substantial beneficial interests shall 
        be subject to reductions in the per person limitations under 
        section 1308 of this title in the manner described in 
        subparagraph (A). Before making such reductions, the Secretary 
        shall notify all individuals or entities affected thereby and 
        permit them to adjust among themselves their interests in the 
        designated entity or entities.

(b) Payments limited to active farmers

                           (1) In general

        To be separately eligible for farm program payments (as 
    described in paragraphs (1) and (2) of section 1308 of this title as 
    being subject to limitation) with respect to a particular farming 
    operation (whether in the person's own right or as a partner in a 
    general partnership, a grantor of a revocable trust, a participant 
    in a joint venture, or a participant in a similar entity (as 
    determined by the Secretary) that is the producer of the crops 
    involved), a person must be an individual or entity described in 
    section 1308(5)(B)(i) of this title and actively engaged in farming 
    with respect to such operation, as provided under paragraphs (2), 
    (3), and (4).

           (2) General classes actively engaged in farming

        For the purposes of paragraph (1), except as otherwise provided 
    in paragraph (3):

        (A) Individuals

            An individual shall be considered to be actively engaged in 
        farming with respect to a farm operation if--
                (i) the individual makes a significant contribution 
            (based on the total value of the farming operation) of--
                    (I) capital, equipment, or land; and
                    (II) personal labor or active personal management;

          to the farming operation; and
                (ii) the individual's share of the profits or losses 
            from the farming operation is commensurate with the 
            individual's contributions to the operation; and
                (iii) the individual's contributions are at risk.

        (B) Corporations or other entities

            A corporation or other entity described in section 
        1308(5)(B)(i)(II) of this title shall be considered as actively 
        engaged in farming with respect to a farming operation if--
                (i) the entity separately makes a significant 
            contribution (based on the total value of the farming 
            operation) of capital, equipment, or land;
                (ii) the stockholders or members collectively make a 
            significant contribution of personal labor or active 
            personal management to the operation; and
                (iii) the standards provided in clauses (ii) and (iii) 
            of paragraph (A), as applied to the entity, are met by the 
            entity.

        (C) Entities making significant contributions

            If a general partnership, joint venture, or similar entity 
        (as determined by the Secretary) separately makes a significant 
        contribution (based on the total value of the farming operation 
        involved) of capital, equipment, or land, and the standards 
        provided in clauses (ii) and (iii) of paragraph (A), as applied 
        to the entity, are met by the entity, the partners or members 
        making a significant contribution of personal labor or active 
        personal management shall be considered to be actively engaged 
        in farming with respect to the farming operation involved.

        (D) Equipment and personal labor

            In making determinations under this subsection regarding 
        equipment and personal labor, the Secretary shall take into 
        consideration the equipment and personal labor normally and 
        customarily provided by farm operators in the area involved to 
        produce program crops.

           (3) Special classes actively engaged in farming

        Notwithstanding paragraph (2), the following persons shall be 
    considered to be actively engaged in farming with respect to a farm 
    operation:

        (A) Landowners

            A person that is a landowner contributing the owned land to 
        the farming operation if the landowner receives rent or income 
        for such use of the land based on the land's production or the 
        operation's operating results, and the person meets the standard 
        provided in clauses (ii) and (iii) of paragraph (2)(A).

        (B) Family members

            With respect to a farming operation conducted by persons, a 
        majority of whom are individuals who are family members, an 
        adult family member who makes a significant contribution (based 
        on the total value of the farming operation) of active personal 
        management or personal labor and, with respect to such 
        contribution, who meets the standards provided in clauses (ii) 
        and (iii) of paragraph (2)(A). For the purposes of the preceding 
        sentence, the term ``family member'' means an individual to whom 
        another family member in the farming operation is related as 
        lineal ancestor, lineal descendant, or sibling (including the 
        spouses of those family members who do not make a significant 
        contribution themselves).

        (C) Sharecroppers

            A sharecropper who makes a significant contribution of 
        personal labor to the farming operation and, with respect to 
        such contribution, who meets the standards provided in clauses 
        (ii) and (iii) of paragraph (2)(A).

             (4) Persons not actively engaged in farming

        For the purposes of paragraph (1), except as provided in 
    paragraph (3), the following persons shall not be considered to be 
    actively engaged in farming with respect to a farm operation:

        (A) Landlords

            A landlord contributing land to the farming operation if the 
        landlord receives cash rent, or a crop share guaranteed as to 
        the amount of the commodity to be paid in rent, for such use of 
        the land.

        (B) Other persons

            Any other person, or class of persons, determined by the 
        Secretary as failing to meet the standards set out in paragraphs 
        (2) and (3).

                     (5) Custom farming services

        A person receiving custom farming services will be considered 
    separately eligible for payment limitation purposes if such person 
    is actively engaged in farming based on paragraphs (1) through (3). 
    No other rules with respect to custom farming shall apply.

                     (6) Growers of hybrid seed

        To determine whether a person growing hybrid seed under contract 
    shall be considered to be actively engaged in farming, the Secretary 
    shall not take into consideration the existence of a hybrid seed 
    contract.

(Pub. L. 99-198, title X, Sec. 1001A, as added and amended Pub. L. 100-
203, title I, Secs. 1301(a)(3), 1302, Dec. 22, 1987, 101 Stat. 1330-12, 
1330-14; Pub. L. 101-624, title XI, Sec. 1111(d), (f), Nov. 28, 1990, 
104 Stat. 3498, 3499; Pub. L. 102-237, title I, Sec. 118(c), Dec. 13, 
1991, 105 Stat. 1841; Pub. L. 104-127, title I, Sec. 115(c)(1), Apr. 4, 
1996, 110 Stat. 903.)

                          Codification

    Section was enacted as part of the Food Security Act of 1985, and 
not as part of the Agricultural Adjustment Act of 1938 which comprises 
this chapter.


                               Amendments

    1996--Subsec. (a)(1). Pub. L. 104-127, Sec. 115(c)(1)(A), struck out 
``under the Agricultural Act of 1949 (7 U.S.C. 1421 et seq.)'' before 
``may not also hold''.
    Subsec. (b)(1). Pub. L. 104-127, Sec. 115(c)(1)(B), struck out 
``under the Agricultural Act of 1949'' before ``with respect to a 
particular''.
    1991--Subsec. (a)(2). Pub. L. 102-237 struck out ``0 to'' after 
``less than''.
    1990--Subsec. (a)(2). Pub. L. 101-624, Sec. 1111(f), substituted ``0 
to 10 percent'' for ``10 percent''.
    Subsec. (b)(6). Pub. L. 101-624, Sec. 1111(d), added par. (6).
    1987--Subsec. (b). Pub. L. 100-203, Sec. 1302, added subsec. (b).


                    Effective Date of 1990 Amendment

    Amendment by Pub. L. 101-624 effective beginning with 1991 crop of 
an agricultural commodity, with provision for prior crops, see section 
1171 of Pub. L. 101-624, set out as a note under section 1421 of this 
title.


                    Effective Date of 1987 Amendment

    Section 1302 of Pub. L. 100-203 provided that the amendment made by 
that section is effective beginning with 1989 crops.


                             Effective Date

    Section 1301(a) of Pub. L. 100-203 provided that this section is 
effective beginning with 1989 crops.

                  Section Referred to in Other Sections

    This section is referred to in sections 1308, 1308-2, 1308-4, 7215 
of this title.
