End Rows for June 21, 2011

Wednesday, June 22, 2011

When changes in farm ownership or operation take place, a farm reconstitution is necessary.

The reconstitution -- or recon -- is the process of combining or dividing farms or tracts of land based on the farming operation.

Remember, to be effective for the current year, recons must be requested by August 1.

It's important to remember there are four methods to divide base acres when a farm or tract division occurs

Estate Method

The division of bases, allotments and quotas for a parent farm among heirs in settling an estate

Under this method, bases are divided according to the will or a written agreement by all heirs

Designation by Landowner Method

May be used when:

--part of a farm is sold or ownership is transferred;

--an entire farm is sold to two or more persons;

--farm ownership is transferred to two or more persons;

--part of a tract is sold or ownership is transferred;

--a tract is sold to two or more persons; or

--tract ownership is transferred to two or more persons.

In order to use this method the land sold must have been owned for at least three years, or a waiver must be granted, and the buyer and seller must sign a Memorandum of Understanding;

DCP Cropland Method The division of bases in the same proportion that the DCP cropland for each resulting tract relates to the DCP cropland on the parent tract;

Default Method

The division of bases for a parent farm with each tract maintaining the bases attributed to the tract level when the reconstitution is initiated in the system.

--If DCP ACRE payments have already been issued, those payments may need to be refunded and reissued depending on the situation.

Land ownership changes and CRP

Land sales also affect CRP contracts. If you are considering selling or buying land on which a CRP contract exists, you should keep the following in mind:

--FSA does not require purchasers of land to succeed to CRP contracts

--New owners can succeed if they want to, but if they choose not to, FSA will terminate the contract and require refunds from the previous owner.

--If a new landowner does succeed to a CRP contract, they should keep in mind that they are accepting responsibility for the contract back to day one. If the contract is terminated prior to its expiration, or determined to be in violation, the new owner is responsible for all payments that USDA has issued since the beginning of the contract, even though they were issued to a previous owner.

--Successions to CRP contracts must be signed by all participants within 60 days of notification from the FSA office. If this deadline is not met, FSA can terminate the contract, which again, would require refunds from the previous owner.

--Also, if the buyer is going to succeed to the CRP contract, they should discuss with the seller how the annual rental payment for the current year will be prorated. If no agreement exists, FSA will prorate the payment based on the date the deed is recorded.

--There are also some things to keep in mind when a tenant receives a share of the CRP contract:

The tenant has the right to remain on the contract, even if the land is sold, unless the tenant voluntarily relinquishes their rights.

FSA must receive notice from the tenant in writing if they wish to relinquish their rights to the CRP.

If you are part of a real estate transaction involving a CRP contract, make sure everyone involved understands what is to become of the CRP contract.

Be sure to request any needed reconstitutions by August 1.