Will Pass-Through Entity Rules Start for 2025 or 2026 Crop Years
OBBBA changed the payment limitation rules. When will it be effective?
The One Big Beautiful Bill Act (OBBBA) changed the payment limitation provisions for certain pass-through entities. Before the change, only general partnerships and “qualified” joint ventures had no payment limitations. Rather, the limitation was at the partner level.
As an example, assume a farm with four equal participating owners was structured as a general partnership. In this situation, the farm qualified for four payment limits. However, if the farm was structured as an LLC or S corporation, it only qualified for one payment limit.
OBBBA added a new provision (in Section 10306) for qualified pass-through entities to treat them the same as a general partnership. A qualified pass-through entity is:
Any partnership,
An S corporation,
A Limited Liability Company (LLC) that is not taxed as a regular corporation, or
A joint venture or general partnership.
The key question is when this change would take effect. Would it happen for the 2025 crop year (many of the other provisions such as the increased payment limit is effective for the 2025 crop year) or would it happen for the 2026 crop year?
