Payment Eligibility and Adjusted Gross Income: Important Things to Know
Most Frequently Asked Questions about the Average Adjusted Gross Income (AGI) Verification Process
- Why is it necessary to verify average AGI? Answer
- What process has been developed to verify average AGI? Answer
- Will there be an opportunity to provide additional information or possible explanation and appeal if the results show that it appears one or more of the average AGI limitations have been exceeded? Answer
- What is required for USDA to verify average AGI? Answer
- When must the applicable consent form be completed and where does it go? Answer
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Regulations and Procedures
Average Adjusted Gross Income Verification Process
The 2008 Farm Bill, as amended by the American Taxpayer Relief Act of 2012, required the establishment of valid procedures under which to conduct audits of persons and legal entities determined most likely to exceed the AGI limitations. USDA and the Internal Revenue Service (IRS) have developed an electronic information exchange process strictly for the purpose of average AGI verification. This process electronically looks at certain line items on tax returns filed for the applicable three-year period; performs a series of calculations to arrive at the average amounts; and then compares these values to the average AGI limitations. USDA receives the results of these comparisons with indicators of whether the participant appears to exceed or not exceed the average AGI amounts. No actual tax data will be included. The cases that appear to exceed the average AGI limitations will be received and evaluated by FSA state office or headquarters personnel.
The average AGI provisions are applicable to the majority of the 2009 and subsequent years’ programs administered by the Farm Service Agency (FSA) and Natural Resources Conservation Service (NRCS). Different income thresholds will be used to determine eligibility for different programs.
A person or legal entity with:
- Adjusted Gross Nonfarm Income exceeding $500,000 is ineligible for all commodity program payments and benefits;
- Adjusted Gross Farm Income exceeding $750,000 is ineligible for Direct and Counter-cyclical Program (DCP) Direct Payments;
- Adjusted Gross Income (all income; both farm and nonfarm) exceeding $1 million is ineligible for 2012 and 2013;
- Adjusted Gross Nonfarm Income exceeding $1 million is ineligible for conservation programs, unless at least 66.66% of total AGI was farm income. (Note: This limitation may be waived on a case-by-case basis for the protection of environmentally sensitive land of special significance.)
Participants in CCC programs subject to average AGI rules must annually certify their eligibility to receive benefits by either submitting a statement from a certified public accountant or an attorney, or by completing form CCC-933. If the participant is a general partnership or a joint venture, AGI certifications are required from each member who is an individual or entity, and from each embedded interest holder.
If the participant is an entity, AGI certifications are required from the participating entity and from each interest holder who is an individual or entity and from each embedded interest holder.
Compliance with AGI rules will be tracked through four levels of legal entity ownership. If individuals or entities within those four levels do not comply with average AGI provisions, payments will be reduced by an amount commensurate with the ineligible share.