A2O-Lancasttr Fanning, Saturday, February 6, 1988
Tunnel out if you have to,
How Can You Stay Eligible
For USD A Programs
Prepared By
WILLIAM McSWEENEY
PSU Extension Economist
UNIVERSITY PARK On Septem
ber 17, 1987, the Highly Erodible Land
and Wetland Conservation Final Rule was
published in the Federal Register. As of
that date, all farmers in the United States
became subject to this Final Rule which
pertains to the Conservation Title (Title
XII) of the Food Security Act of 1985.
More importantly, however, every farmer
is now assumed to be knowledgeable of the
various provisions and their implications.
Carrying the force of law, the Final Rule
lays out in detail the requirements every
farmer must adhere to in order to remain
eligible for various USD A farm programs.
Violation of these requirements, even
inadvertently, can mean the loss of eligi
bility for commodity price and income
support programs, federal crop insurance,
disaster payments. Fanners Home Admi
nistration loans and loan guarantees, and
the Conservation Reserve Program. This
amounts to a here-to-fore unheard of
action (at least to many farmers) by the
general public of restricting how farmers
use their land if they wish to benefit from
publicly provided programs.
In essence, the general public, through
the U.S. Congress, has now made a state
ment of its expectations of reasonable and
responsible use of agricultural land. Many
farmers will find it hard to accept the
notion of the general public placing restric
tions on the use of privately owned land,
perhaps feeling that “Society has no right
to tell me how to farm my land!” From the
very beginning of this Nation, however,
the general public has retained rights in the
use of land. These rights in the use of land
have generally gone unused. Times have
changed.
It is important for farmers to realize that
society, at this point-in-time, is not placing
absolute restrictions on the use of farm
land. If you do not currently make use of
any of the USDA programs mentioned ear
lier, and if you expect that you will not
make use of them in the future, then you
are not obligated under the provisions of
the Food Security Act to do anything
regarding the use of your farm land. Most
farmers, however, in light of the recent
farm crisis will want to protect their eligi
bility for these programs in case they are
needed in the future. To protect your eligi
bility for these USDA programs, you must
follow five basic steps.
STEP 1: See if you have highly erodible
land or wetlands on your farm. Your local
Soil Conservation Service office has a list
of highly erodible soil mapping units.
Check that list against the soil mapping
units on your farm. You can find the soils
on your farm in a soil survey, which is also
available from your SCS office if a survey
is complete in your county.
A field must be predominantly highly
erodible and used to produce an agricultur
al commodity before it is subject to either
sodbuster or conservation compliance. A
field is predominantly highly erodible
when one-third or more of the field is made
of highly erodible soil map units, or if the
highly erodible area is 50 acres or more.
STEP 2: EX) not drain wetlands to grow
crops. Converting wetlands for the pur
pose of growing crops is a violation that
will result in ineligibility.
Your local SCS office can also help
determine if you have any wetlands on
your farm. It is important to realize that not
all wetlands are swampy or marshy in
appearance. If you have even the slightest
suspicion that you have wet soils on your
farm, check with your local SCS office
before you drain or otherwise alter the
(Turn to Pag* A2l)
Effort Underway To Repeal
Expense Rules
Pre-productive
Reps. Byron Dorgan (D-ND) and Hal
Daub (R-ND) are expected to introduce
legislation this week to repeal the changes
in handling of pre-productive expenses.
NMPF is working with a coalition of
groups to marshall support for the repeal
effort.
Your Congressional representatives
need to know the impact of this law on
dairy farmers. Congress needs to act now
to repeal this new tax law which flies in the
face of simplification. Contact your Sena
tors and Representatives now and urge
repeal of this confusing measure.
The 1986 tax reform law made major
changes in the pre-productive period
expense rules for dairy fanners. Although
legislation was approved last year by the
House which would have repealed the tax
changes, it was blocked from enactment
late in the 1987 session.
The new pre-productive period rules
took effect for expenses and income begin
ning Jan. 1, 1987. Your 1987 tax return
must be done using the new rules.
The rule requires farmers to capitalize
the expenses incurred in raising animals
prior to their beginning production (feed,
interest, health care, pasture, etc.). The law
applies to any animal having a pre
productive period of two years or more.
This pre-productive period is considered to
start at the time of breeding, embryo
implantation or purchase.
The IRS will be issuing unit cost figures,
or you can estimate those costs.
The IRS will allow two basic inventory
methods. The first is a “farm-price”
method, where each animal is valued at its
market price less estimated selling costs.
The other is known as the “unit
livestock-price” method. Animals are
grouped according to kind and age. For
example, a value could be placed on all
animals less than a year old, and a separate
value for animals more than a year old.
make a change if you must,
Because pre-productive expenses begin at
time of breeding, another category may be
for unborn heifer calves.
The most serious problem for dairy far
mers is knowing how many animals to
capitalize. It is difficult to know before
birth how many calves will be held for the
producing herd.
Once all the calculations have been
made, the total is subtracted as an expense
on Schedule F. When each animal
becomes a part of the milking herd, the ani
mal is depreciated on the basis of the costs
which have been capitalized.
There is an alternative, but the trade off
may be costly.
The law allows producers to opt out.
This decision can only be made in the first
taxable year. Once made, this decision is
irrevocable without the consent of IRS.
In exchange for “business as usual,” you
must depreciate all farm assets purchased
in 1987, or the electing year, and from then
on use a straight-line depreciation method,
not faster depreciation schedules.
Farmers must weigh the costs of making
this decision. Your county or State Exten
sion office can provide more information.
If it sounds confusing, that is because it
is confusing. It is especially ironic that this
change was included in a tax package
designed to simplify the tax code and
remove tax shelters. Repeal of this tax
measure will require the effort of all far
mers affected. Contact your legislators
now.
Moves to repeal changes in the collec
tion of the diesel excise tax are taking place
in Congress, supported by NMPF and a
coalition of other agricultural groups.
The Budget Reconciliation Act of 1987
contained a provision changing the collec
(Turn to Pag* A 21)
' ) --
Diesel Fuel
Tax Problem
For Farmers
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