Before the One Big Beautiful Bill Act, farmers with larger farm operations were required to artificially structure their farm as a general partnership in order to maximize the FSA payments that they were entitled too.
A primary concern with the general partnership structure is the imposition of unlimited liability to every partner in the partnership. This liability could easily exceed their value in the partnership and extend to their personal assets.
Larger farm operations then usually created some type of limited liability entity such as an LLC or corporation to shield their personal liability from the general partnership.
This almost always resulted in extra entities, extra tax returns, and extra compliance headaches.
Here is an example:
Assume that three siblings are actively farming 20,000 acres with their spouses. If they simply created one LLC with six equal owners, under the old rules, they would be entitled to six payment limits. However, they instead were required to form a general partnership and then each partner created a husband/wife LLC to provide both legal protection and provide for some self-employment tax savings. This farm operation now has to file seven tax returns. One for the GP and six LLC return for each partner.
OBBBA now fixes this. Instead of filing seven returns, the farm operation can simply convert their general partnership to an LLC and then eliminate the six LLCs and simply have one tax return. It will simplify the compliance burden on the farm operation and there is no extra increase in payment limits.
Even some smaller farms simply operating as a husband/wife LLC were running into some payment limits simply being an LLC instead of a general partnership.
Some commentators seem to believe this is some type of a loophole and will result in an extreme increase in payments going to larger farm operations. The reality is that all of these farm operations were already utilizing the general partnership structure properly to maximize their payments limits. All OBBBA does is fixed the mess of having too many extra entities that serve no purpose other than creating additional cost and complexity for the farm operation.
This is actually one of the best features of OBBBA and should be acknowledged as such.