Qualified Pass-Through Changes Will be in Effect for 2026 Crop Year
It appears that the change will not apply for 2025 crop year
Under Secretary of Agriculture Richard Fordyce was on AgriTalk today discussing the Qualified Pass-Through Entity changes that OBBBA enacted. As we have discussed multiple times, LLCs, LPs, LLPs, etc. and S corporations are now allowed multiple payment limits if there is more than one owner.
Mr. Fordyce appears to indicate these changes will be in effect for the 2026 crop year; however, it does appear that no change will be in effect for the 2025 crop year.
This means for farmers who operate as an S corporation or some type of entity (not a general partnership), your payment limit for 2025 ARC and PLC will be $155,000 (could be $160,000 if indexing applies) whether you have more than one owner or not.
We are not surprised by this since the FBA program limited these entities to one payment limit unlike general partnerships.
Also, he indicated that the June 1 normal deadline will be “ignored”, thus you should have time to get this information to the local FSA office if you will be changing from a general partnership to an LLC.
However, most important, there was no discussion on AGI limits. If your average AGI for an LLC is over $900,000, you get no payments since you are over the limit. Therefore, be very careful in switching if your LLC has high income.
One thing that Mr. Fordyce brought up that now concerns us is the increase in base acres will result in a full reallocation of your base and that can be a problem if true.
What do we mean by that.
Let’s assume that you have 300 acres in a farm in the delta that current has 230 acres of rice base. During the 2019-2023 period the farmer grew 150 acres of rice and 150 acres of soybeans. Let’s assume they can add 30 acres to their base. Our original understanding is the new base would be the old 230 acres of rice plus 15 new acres of rice and 15 acres of soybeans. This would result in 245 rice base acres and 15 soybean base acres.
Based on the discussion that Chip Flory had with Mr. Fordyce, it appeared that he indicated there would be a full allocation of all base acres, old plus new. In this case, a delta farmer that would drop from 230 rice base acres to 130 rice base acres would not sign up for the change.
However, our reading of the final rule indicates existing base acres remains untouched. It is only “new” base acres that are proportionally reallocated. This means the delta farmer would get 245 rice base acres and 15 soybean base acres.
We hope we are correct and we will keep you posted.
Here is a link to AgriTalk and Mr. Fordyce comes on around the 10-minute mark.
Great news!