FAQ: We're working with our accountant and other professionals as my spouse and I consider making some changes to our farming operation in 2011. We currently farm as individuals and are considering changing to a family farm corporation or other type of entity. What things do we need to consider? What should I bring to my local FSA office if this includes a change in ownership of the land?
Answer: Provided by Beth Grabau, public relations and outreach specialist with USDA's Farm Service Agency state office in Des Moines.
Currently, you are farming as an individual and have been completing forms in your local county office as such. Program payments have been issued to you under your social security number. County offices track information, payments, etc. by your tax identification numbers. If you form a new business type, such as a trust, corporation, LLC etc., you will then be paid under a new business name and business tax identification number.
This new business will then need to file new payment eligibility forms (such as CCC-902, AD-1026, CCC-926, direct deposit forms, etc.) under the new name and tax ID number. The individuals who make up this new entity will also be required to file some of these same payment eligibility forms.
Even though many, if not all, of your farming operation components are the same (you are farming the same land, using the same equipment, etc.), you have made a major change. FSA offices will see your operation as a business type. And we need your documentation to reflect this change. This could include obtaining land or equipment leases in the business name, as well as other documentation.
What other information or documentation is required?
If there is a change in land ownership, a copy of the filed deed needs to be provided to the county office. Having the filing date is important for some FSA programs. For example, CRP contracts will be revised to reflect this ownership change. And prorating payments based on ownership is done using the date the deed is filed. DCP contracts may require successor in interest provisions to apply when updating some ownership changes.
If the change in ownership is from you as an individual to a Revocable Trust and you are using your Social Security number, it is imperative you bring in the recorded deed listing the Revocable Trust as the new owner. Additional paperwork will be required, as this is also considered a change for farm program purposes.
Some entities, such as irrevocable trusts, may require additional documentation. Irrevocable trusts require a separate tax ID number; however, you need to check with your local FSA office to see if this requirement or others applies to you.
Other records may also need to be updated with the new business name and number. Remember, you'll need to also make changes to crop insurance policies. Many FSA disaster programs require that the insured name on a crop insurance policy be the same as the name on farm program contracts.
If you have specific questions or need details regarding USDA farm programs, contact your local USDA Farm Service Agency office. You can also get news and information about DCP, ACRE and other USDA programs at www.fsa.usda.gov.
Two Iowa State University Extension Web sites have farm program information and analysis. They are ISU's Ag Decision Maker site at www.extension.iastate.edu/agdm and ISU Extension Specialist Steve Johnson's site at www.extension.iastate.edu/polk/farmmanagement.htm. And be sure to read the regular column "Frequently Asked Questions about the Farm Program" that appears in each issue of Wallaces Farmer magazine and at www.WallacesFarmer.com
Two Iowa State University Extension Web sites have farm program information and analysis. They are ISU's Ag Decision Maker site at www.extension.iastate.edu/agdm and ISU Extension Specialist Steve Johnson's site at www.extension.iastate.edu/polk/farmmanagement.htm.
And be sure to read the regular column "Frequently Asked Questions about the Farm Program" that appears in each issue of Wallaces Farmer magazine and at www.WallacesFarmer.com