PAYMENT LIMITATIONS.

SEC. 1603. PAYMENT LIMITATIONS.(a) Extension of Limitations.—Sections 1001 and 1001C(a) of the Food Security Act of 1985 (7 U.S.C. 1308, 1308–3(a)) are amended by striking “Farm Security and Rural Investment Act of 2002” each place it appears and inserting “Food, Conservation, and Energy Act of 2008”.(b) Revision of Limitations.—(1) Definitions.—Section 1001(a) of the Food Security Act of 1985 (7 U.S.C. 1308(a)) is amended—(A) in the matter preceding paragraph (1), by inserting “through section 1001F”after “section”;(B) by striking paragraph (2) and redesignating paragraph (3) as paragraph (5); and(C) by inserting after paragraph (1) the following:“(2) Family member.—The term ‘family member’ means a person to whom a member in the farming operation is related as lineal ancestor, lineal descendant, sibling, spouse, or otherwise by marriage.“(3) Legal entity.—The term ‘legal entity’ means an entity that is created under Federal or State law and that—“(A) owns land or an agricultural commodity; or“(B) produces an agricultural commodity.“(4) Person.—The term ‘person’ means a natural person, and does not include a legal entity.”.(2) Limitation on direct payments and counter-cyclical payments.—Section 1001 of the Food Security Act of 1985 (7 U.S.C. 1308) is amended by striking subsections (b), (c), and (d) and inserting the following:“(b) Limitation on Direct Payments, Counter-Cyclical Payments, and ACRE Payments for Covered Commodities (other Than Peanuts).—“(1) Direct payments.—The total amount of direct payments received, directly or indirectly, by a person or legal entity (except a joint venture or a general partnership) for any crop year under subtitle A of title I of the Food, Conservation, and Energy Act of 2008 for 1 or more covered commodities (except for peanuts) may not exceed—“(A) in the case of a person or legal entity that does not participate in the average crop revenue election program under section 1105 of that Act, $40,000; or“(B) in the case of a person or legal entity that participates in the average crop revenue election program under section 1105 of that Act, an amount equal to—“(i) the payment limit specified in subparagraph (A); less122 STAT. 1003“(ii) the amount of the reduction in direct payments under section 1105(a)(1) of that Act.“(2) Counter-cyclical payments.—In the case of a person or legal entity (except a joint venture or a general partnership) that does not participate in the average crop revenue election program under section 1105 of the Food, Conservation, and Energy Act of 2008, the total amount of counter-cyclical payments received, directly or indirectly, by the person or legal entity for any crop year under subtitle A of title I of that Act for 1 or more covered commodities (except for peanuts) may not exceed $65,000.“(3) ACRE and counter-cyclical payments.—In the case of a person or legal entity (except a joint venture or a general partnership) that participates in the average crop revenue election program under section 1105 of the Food, Conservation, and Energy Act of 2008, the total amount of average crop revenue election payments and counter-cyclical payments received, directly or indirectly, by the person or legal entity for any crop year for 1 or more covered commodities (except for peanuts) may not exceed the sum of—“(A) $65,000; and“(B) the amount by which the direct payment limitation is reduced under paragraph (1)(B).“(c) Limitation on Direct Payments, Counter-Cyclical Payments, and ACRE Payments for Peanuts.—“(1) Direct payments.—The total amount of direct payments received, directly or indirectly, by a person or legal entity (except a joint venture or a general partnership) for any crop year under subtitle C of title I of the Food, Conservation, and Energy Act of 2008 for peanuts may not exceed—“(A) in the case of a person or legal entity that does not participate in the average crop revenue election program under section 1105 of that Act, $40,000; or“(B) in the case of a person or legal entity that participates in the average crop revenue election program under section 1105 of that Act, an amount equal to—“(i) the payment limit specified in subparagraph (A); less“(ii) the amount of the reduction in direct payments under section 1105(a)(1) of that Act.“(2) Counter-cyclical payments.—In the case of a person or legal entity (except a joint venture or a general partnership) that does not participate in the average crop revenue election program under section 1105 of the Food, Conservation, and Energy Act of 2008, the total amount of counter-cyclical payments received, directly or indirectly, by the person or legal entity for any crop year under subtitle C of title I of that Act for peanuts may not exceed $65,000.“(3) ACRE and counter-cyclical payments.—In the case of a person or legal entity (except a joint venture or a general partnership) that participates in the average crop revenue election program under section 1105 of the Food, Conservation, and Energy Act of 2008, the total amount of average crop revenue election payments received, directly or indirectly, by the person or legal entity for any crop year for peanuts may not exceed the sum of—“(A) $65,000; and122 STAT. 1004“(B) the amount by which the direct payment limitation is reduced under paragraph (1)(B).“(d) Limitation on Applicability.—Nothing in this section authorizes any limitation on any benefit associated with the marketing assistance loan program or the loan deficiency payment program under title I of the Food, Conservation, and Energy Act of 2008.”.(3) Direct attribution.—Section 1001 of the Food Security Act of 1985 (7 U.S.C. 1308) is amended—(A) by striking subsections (e) and (f) and redesignating subsection (g) as subsection (h); and(B) by inserting after subsection (d) the following:“(e) Attribution of Payments.—“(1) In general.—In implementing subsections (b) and (c) and a program described in paragraphs (1)(C) and (2)(B) of section 1001D(b), the Secretary shall issue such regulations as are necessary to ensure that the total amount of payments are attributed to a person by taking into account the direct and indirect ownership interests of the person in a legal entity that is eligible to receive the payments.“(2) Payments to a person.—Each payment made directly to a person shall be combined with the pro rata interest of the person in payments received by a legal entity in which the person has a direct or indirect ownership interest unless the payments of the legal entity have been reduced by the pro rata share of the person.“(3) Payments to a legal entity.—“(A) In general.—Each payment made to a legal entity shall be attributed to those persons who have a direct or indirect ownership interest in the legal entity unless the payment to the legal entity has been reduced by the pro rata share of the person.“(B) Attribution of payments.—“(i) Payment limits.—Except as provided in clause (ii), payments made to a legal entity shall not exceed the amounts specified in subsections (b) and (c).“(ii) Exception for joint ventures and general partnerships.—Payments made to a joint venture or a general partnership shall not exceed, for each payment specified in subsections (b) and (c), the amount determined by multiplying the maximum payment amount specified in subsections (b) and (c) by the number of persons and legal entities (other than joint ventures and general partnerships) that comprise the ownership of the joint venture or general partnership.“(iii) Reduction.—Payments made to a legal entity shall be reduced proportionately by an amount that represents the direct or indirect ownership in the legal entity by any person or legal entity that has otherwise exceeded the applicable maximum payment limitation.“(4) 4 levels of attribution for embedded legal entities.—“(A) In general.—Attribution of payments made to legal entities shall be traced through 4 levels of ownership in legal entities.“(B) First level.—Any payments made to a legal entity (a first-tier legal entity) that is owned in whole 122 STAT. 1005 or in part by a person shall be attributed to the person in an amount that represents the direct ownership in the first-tier legal entity by the person.“(C) Second level.—“(i) In general.—Any payments made to a first-tier legal entity that is owned (in whole or in part) by another legal entity (a second-tier legal entity) shall be attributed to the second-tier legal entity in proportion to the ownership of the second-tier legal entity in the first-tier legal entity.“(ii) Ownership by a person.—If the second-tier legal entity is owned (in whole or in part) by a person, the amount of the payment made to the first-tier legal entity shall be attributed to the person in the amount that represents the indirect ownership in the first-tier legal entity by the person.“(D) Third and fourth levels.—“(i) In general.—Except as provided in clause (ii), the Secretary shall attribute payments at the third and fourth tiers of ownership in the same manner as specified in subparagraph (C).“(ii) Fourth-tier ownership.—If the fourth-tier of ownership is that of a fourth-tier legal entity and not that of a person, the Secretary shall reduce the amount of the payment to be made to the first-tier legal entity in the amount that represents the indirect ownership in the first-tier legal entity by the fourth-tier legal entity.“(f) Special Rules.—“(1) Minor children.—“(A) In general.—Except as provided in subparagraph (B), payments received by a child under the age of 18 shall be attributed to the parents of the child.“(B) Regulations.—The Secretary shall issue regulations specifying the conditions under which payments received by a child under the age of 18 will not be attributed to the parents of the child.“(2) Marketing cooperatives.—Subsections (b) and (c) shall not apply to a cooperative association of producers with respect to commodities produced by the members of the association that are marketed by the association on behalf of the members of the association but shall apply to the producers as persons.“(3) Trusts and estates.—“(A) In general.—With respect to irrevocable trusts and estates, the Secretary shall administer this section through section 1001F in such manner as the Secretary determines will ensure the fair and equitable treatment of the beneficiaries of the trusts and estates.“(B) Irrevocable trust.—“(i) In general.—In order for a trust to be considered an irrevocable trust, the terms of the trust agreement shall not—“(I) allow for modification or termination of the trust by the grantor;122 STAT. 1006“(II) allow for the grantor to have any future, contingent, or remainder interest in the corpus of the trust; or“(III) except as provided in clause (ii), provide for the transfer of the corpus of the trust to the remainder beneficiary in less than 20 years beginning on the date the trust is established.“(ii) Exception.—Clause (i)(III) shall not apply in a case in which the transfer is—“(I) contingent on the remainder beneficiary achieving at least the age of majority; or“(II) contingent on the death of the grantor or income beneficiary.“(C) Revocable trust.—For the purposes of this section through section 1001F, a revocable trust shall be considered to be the same person as the grantor of the trust.“(4) Cash rent tenants.—“(A) Definition.—In this paragraph, the term ‘cash rent tenant’ means a person or legal entity that rents land—“(i) for cash; or“(ii) for a crop share guaranteed as to the amount of the commodity to be paid in rent.“(B) Restriction.—A cash rent tenant who makes a significant contribution of active personal management, but not of personal labor, with respect to a farming operation shall be eligible to receive a payment described in subsection (b) or (c) only if the tenant makes a significant contribution of equipment to the farming operation.“(5) Federal agencies.—“(A) In general.—Notwithstanding subsection (d), a Federal agency shall not be eligible to receive any payment, benefit, or loan under title I of the Food, Conservation, and Energy Act of 2008 or title XII of this Act.“(B) Land rental.—A lessee of land owned by a Federal agency may receive a payment described in subsection (b), (c), or (d) if the lessee otherwise meets all applicable criteria.“(6) State and local governments.—“(A) In general.—Notwithstanding subsection (d), except as provided in subsection (g), a State or local government, or political subdivision or agency of the government, shall not be eligible to receive any payment, benefit, or loan under title I of the Food, Conservation, and Energy Act of 2008 or title XII of this Act.“(B) Tenants.—A lessee of land owned by a State or local government, or political subdivision or agency of the government, may receive payments described in subsections (b), (c), and (d) if the lessee otherwise meets all applicable criteria.“(7) Changes in farming operations.—“(A) In general.—In the administration of this section through section 1001F, the Secretary may not approve any change in a farming operation that otherwise will increase the number of persons to which the limitations 122 STAT. 1007 under this section are applied unless the Secretary determines that the change is bona fide and substantive.“(B) Family members.—The addition of a family member to a farming operation under the criteria set out in section 1001A shall be considered a bona fide and substantive change in the farming operation.“(8) Death of owner.—“(A) In general.—If any ownership interest in land or a commodity is transferred as the result of the death of a program participant, the new owner of the land or commodity may, if the person is otherwise eligible to participate in the applicable program, succeed to the contract of the prior owner and receive payments subject to this section without regard to the amount of payments received by the new owner.“(B) Limitations on prior owner.—Payments made under this paragraph shall not exceed the amount to which the previous owner was entitled to receive under the terms of the contract at the time of the death of the prior owner.“(g) Public Schools.—“(1) In general.—Notwithstanding subsection (f)(6)(A), a State or local government, or political subdivision or agency of the government, shall be eligible, subject to the limitation in paragraph (2), to receive a payment described in subsection (b) or (c) for land owned by the State or local government, or political subdivision or agency of the government, that is used to maintain a public school.“(2) Limitation.—“(A) In general.—For each State, the total amount of payments described in subsections (b) and (c) that are received collectively by the State and local government and all political subdivisions or agencies of those governments shall not exceed $500,000.“(B) Exception.—The limitation in subparagraph (A) shall not apply to States with a population of less than 1,500,000.”.(c) Repeal of 3-Entity Rule.—Section 1001A of the Food Security Act of 1985 (7 U.S.C. 1308–1) is amended—(1) in the section heading, by striking “prevention of creation of entities to qualify as separate persons” and inserting “notification of interests”; and(2) by striking subsection (a) and inserting the following:“(a) Notification of Interests.—To facilitate administration of section 1001 and this section, each person or legal entity receiving payments described in subsections (b) and (c) of section 1001 as a separate person or legal entity shall separately provide to the Secretary, at such times and in such manner as prescribed by the Secretary—“(1) the name and social security number of each person, or the name and taxpayer identification number of each legal entity, that holds or acquires an ownership interest in the separate person or legal entity; and“(2) the name and taxpayer identification number of each legal entity in which the person or legal entity holds an ownership interest.”.122 STAT. 1008(d) Amendment for Consistency.—Section 1001A of the Food Security Act of 1985 (7 U.S.C. 1308–1) is amended by striking subsection (b) and inserting the following:“(b) Actively Engaged.—“(1) In general.—To be eligible to receive a payment described in subsection (b) or (c) of section 1001, a person or legal entity shall be actively engaged in farming with respect to a farming operation as provided in this subsection or subsection (c).“(2) Classes actively engaged.—Except as provided in subsections (c) and (d)—“(A) a person (including a person participating in a farming operation as a partner in a general partnership, a participant in a joint venture, a grantor of a revocable trust, or a participant in a similar entity, as determined by the Secretary) shall be considered to be actively engaged in farming with respect to a farming operation if—“(i) the person makes a significant contribution (based on the total value of the farming operation) to the farming operation of—“(I) capital, equipment, or land; and“(II) personal labor or active personal management;“(ii) the person’s share of the profits or losses from the farming operation is commensurate with the contributions of the person to the farming operation; and“(iii) the contributions of the person are at risk;“(B) a legal entity that is a corporation, joint stock company, association, limited partnership, charitable organization, or other similar entity determined by the Secretary (including any such legal entity participating in the farming operation as a partner in a general partnership, a participant in a joint venture, a grantor of a revocable trust, or as a participant in a similar legal entity as determined by the Secretary) shall be considered as actively engaged in farming with respect to a farming operation if—“(i) the legal 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 subparagraph (A), as applied to the legal entity, are met by the legal entity;“(C) if a legal entity that is 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 subparagraph (A), as applied to the legal entity, are met by the legal entity, the partners or members making a significant contribution of personal labor or active personal management shall be considered 122 STAT. 1009 to be actively engaged in farming with respect to the farming operation involved; and“(D) 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.“(c) Special Classes Actively Engaged.—“(1) Landowner.—A person or legal entity that is a landowner contributing the owned land to a farming operation shall be considered to be actively engaged in farming with respect to the farming operation if—“(A) the landowner receives rent or income for the use of the land based on the production on the land or the operating results of the operation; and“(B) the person or legal entity meets the standards provided in clauses (ii) and (iii) of subsection (b)(2)(A).“(2) Adult family member.—If a majority of the participants in a farming operation are family members, an adult family member shall be considered to be actively engaged in farming with respect to the farming operation if the person—“(A) makes a significant contribution, based on the total value of the farming operation, of active personal management or personal labor; and“(B) with respect to such contribution, meets the standards provided in clauses (ii) and (iii) of subsection (b)(2)(A).“(3) Sharecropper.—A sharecropper who makes a significant contribution of personal labor to a farming operation shall be considered to be actively engaged in farming with respect to the farming operation if the contribution meets the standards provided in clauses (ii) and (iii) of subsection (b)(2)(A).“(4) Growers of hybrid seed.—In determining whether a person or legal entity 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.“(5) Custom farming services.—“(A) In general.—A person or legal entity receiving custom farming services shall be considered separately eligible for payment limitation purposes if the person or legal entity is actively engaged in farming based on subsection (b)(2) or paragraphs (1) through (4) of this subsection.“(B) Prohibition.—No other rules with respect to custom farming shall apply.“(6) Spouse.—If 1 spouse (or estate of a deceased spouse) is determined to be actively engaged, the other spouse shall be determined to have met the requirements of subsection (b)(2)(A)(i)(II).“(d) Classes Not Actively Engaged.—“(1) Cash rent landlord.—A landlord contributing land to a farming operation shall not be considered to be actively engaged in farming with respect 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 the use of the land.122 STAT. 1010“(2) Other persons and legal entities.—Any other person or legal entity that the Secretary determines does not meet the standards described in subsections (b)(2) and (c) shall not be considered to be actively engaged in farming with respect to a farming operation.”.(e) Denial of Program Benefits.—Section 1001B of the Food Security Act of 1985 (7 U.S.C. 1308–2) is amended to read as follows:“SEC. 1001B. DENIAL OF PROGRAM BENEFITS.“(a) 2-Year Denial of Program Benefits.—A person or legal entity shall be ineligible to receive payments specified in subsections (b) and (c) of section 1001 for the crop year, and the succeeding crop year, in which the Secretary determines that the person or legal entity—“(1) failed to comply with section 1001A(b) and adopted or participated in adopting a scheme or device to evade the application of section 1001, 1001A, or 1001C; or“(2) intentionally concealed the interest of the person or legal entity in any farm or legal entity engaged in farming.“(b) Extended Ineligibility.—If the Secretary determines that a person or legal entity, for the benefit of the person or legal entity or the benefit of any other person or legal entity, has knowingly engaged in, or aided in the creation of a fraudulent document, failed to disclose material information relevant to the administration of sections 1001 through 1001F, or committed other equally serious actions (as identified in regulations issued by the Secretary), the Secretary may for a period not to exceed 5 crop years deny the issuance of payments to the person or legal entity.“(c) Pro Rata Denial.—“(1) In general.—Payments otherwise owed to a person or legal entity described in subsections (a) or (b) shall be denied in a pro rata manner based on the ownership interest of the person or legal entity in a farm.“(2) Cash rent tenant.—Payments otherwise payable to a person or legal entity shall be denied in a pro rata manner if the person or legal entity is a cash rent tenant on a farm owned or under the control of a person or legal entity with respect to which a determination has been made under subsection (a) or (b).“(d) Joint and Several Liability.—Any legal entity (including partnerships and joint ventures) and any member of any legal entity determined to have knowingly participated in a scheme or device to evade, or that has the purpose of evading, sections 1001, 1001A, or 1001C shall be jointly and severally liable for any amounts that are payable to the Secretary as the result of the scheme or device (including amounts necessary to recover those amounts).“(e) Release.—The Secretary may partially or fully release from liability any person or legal entity who cooperates with the Secretary in enforcing sections 1001, 1001A, and 1001C, and this section.” .(f) Conforming Amendment to Apply Direct Attribution to NAP.—(1) In general.—Section 196(i) of the Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 7333(i)) is amended—122 STAT. 1011(A) by striking paragraphs (1) and (2) and inserting the following:“(1) Definitions.—In this subsection, the terms ‘legal entity’ and ‘person’ have the meanings given those terms in section 1001(a) of the Food Security Act of 1985 (7 U.S.C. 1308(a)).“(2) Payment limitation.—The total amount of payments received, directly or indirectly, by a person or legal entity (excluding a joint venture or general partnership) for any crop year may not exceed $100,000.”;(B) by striking paragraph (4) and inserting the following:“(4) Adjusted gross income limitation.—A person or legal entity that has an average adjusted gross income in excess of the average adjusted gross income limitation applicable under section 1001D(b)(1)(A) of the Food Security Act of 1985 (7 U.S.C. 1308–3a(b)(1)(A)), or a successor provision, shall not be eligible to receive noninsured crop disaster assistance under this section.”; and(C) in paragraph (5)—(i) by striking “necessary to ensure” and inserting “necessary—“(A) to ensure”; and(ii) by striking “this subsection.” and inserting the following: “this subsection; and“(B) to ensure that payments under this section are attributed to a person or legal entity (excluding a joint venture or general partnership) in accordance with the terms and conditions of sections 1001 through 1001D of the Food Security Act of 1985 (7 U.S.C. 1308 et seq.), as determined by the Secretary.”.(2) Transition.—Section 196(i) of the Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 7333(i)), as in effect on September 30, 2007, shall apply with respect to the 2007 and 2008 crops of any eligible crop.(g) Conforming Amendments.—(1) Section 1009(e) of the Food Security Act of 1985 (7 U.S.C. 1308a(e)) is amended in the second sentence by striking “of $50,000”.(2) Section 609(b)(1) of the Emergency Livestock Feed Assistance Act of 1988 (7 U.S.C. 1471g(b)(1)) is amended by inserting “(before the amendment made by section 1703(a) of the Food, Conservation, and Energy Act of 2008)” after “1985”.(3) Section 524(b)(3) of the Federal Crop Insurance Act (7 U.S.C. 1524(b)(3)) is amended by inserting “(before the amendment made by section 1703(a) of the Food, Conservation, and Energy Act of 2008)” after “1308(5)))”.(4) Section 10204(c)(1) of the Farm Security and Rural Investment Act of 2002 (7 U.S.C. 8204(c)(1)) is amended by inserting “(before the amendment made by section 1703(a) of the Food, Conservation, and Energy Act of 2008)” after “1308)”.(5) Section 1271(c)(3)(A) of the Food, Agriculture, Conservation, and Trade Act of 1990 (16 U.S.C. 2106a(c)(3)(A)) is amended by inserting “(before the amendment made by section 1703(a) of the Food, Conservation, and Energy Act of 2008)” after “1308)”.122 STAT. 1012(6) Section 291(2) of the Trade Act of 1974 (19 U.S.C. 2401(2)) is amended by inserting “(before the amendment made by section 1703(a) of the Food, Conservation, and Energy Act of 2008)” before the period at the end.(h) Transition.—Section 1001, 1001A, and 1001B of the Food Security Act of 1985 (7 U.S.C. 1308, 1308–1, 1308–2), as in effect on September 30, 2007, shall continue to apply with respect to the 2007 and 2008 crops of any covered commodity or peanuts.