One Big Beautiful Bill Act Rewrites USDA Payment Limit Rules

Limited liability companies and S corporations now receive the same treatment as partnerships under USDA payment limits, a structural shift delivered by the One Big Beautiful Bill Act that could multiply the safety-net dollars a multi-member farming operation legally collects.

Grant Ballard, partner at Ark Ag Law, PLLC, and Kristine Tidgren, director of Iowa State University's Center for Agricultural Law and Taxation, detailed the changes in the September webinar "USDA's Payment Limitations, Eligibility, & Ag Tax Considerations," hosted by the National Agricultural Law Center.

What changed for entity structure?

USDA payment limitations cap the annual dollar amount a person or legal entity can receive, directly or indirectly, through conservation programs or federal farm safety net programs such as Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC).

"For many years, it has been accepted that partnerships and joint ventures could obtain multiple payment limits," Ballard said. A three-person partnership in which each member was actively engaged in farming could collect three payment limits.

The regulations previously treated LLCs differently. Three individuals farming as a single LLC were capped at one payment limit. The One Big Beautiful Bill Act erased that distinction, and Ballard said the fix likely grew out of "pushback from accountants and attorneys that wanted to organize farm operations in LLCs." He noted the change was framed as equity: partnerships and LLCs operate the same way, so the rules now treat them the same.

When do the caps move?

A second provision allows the payment limits themselves to increase annually based on the Consumer Price Index. Previously, Congress set the caps in farm bills and left them fixed until the next one. Ballard said a mechanism for automatic annual increases "hasn't existed in the past." Recent regulatory changes also added exceptions to certain adjusted gross income requirements for particular programs.

The Working Families Tax Cuts Act broadened the definition of farming income, meaning diversified producers may now qualify under USDA's average adjusted gross income requirements.

Should growers restructure now?

Ballard's counsel is restraint. "I advise everyone not to make any changes to their current operation until they understand the payment limitations rules," he said, adding that operators must first understand why they believe a change is needed.

Eligibility is not automatic. "An LLC may qualify for multiple payment limits, it does not mean that it certainly will," Ballard said. Adding a son as a 1% owner of an LLC to gain another payment limit, a question he fields often, does not work. The answer is no.

What do the tax changes deliver?

Tidgren walked through a revision to Internal Revenue Code Section 1062, which covers gains from the sale or exchange of farmland to qualified farmers. Sellers may now pay tax on the gain in four equal installments rather than entirely in the year after the sale. "It allows certain sellers of farmland to hold onto their money longer and profit from it," she said. The first installment is due with the return for the year of sale; the next three follow with subsequent returns.

On health coverage, the Affordable Care Act's premium tax credit (a subsidy reducing Marketplace premiums) was expanded by the American Rescue Plan Act of 2021 and extended through 2025 by the Inflation Reduction Act. In 2025, taxpayers above 400% of the federal poverty level could claim a credit for any premium amount for the second-lowest-cost Silver plan exceeding 8.5% of household income.

For 2026, that changes. A new schedule of contribution percentages starts at 2.1% of household income for households below 133% of the poverty level, while households above 400% of the poverty level lose eligibility entirely.

"If you purchased insurance on the Marketplace, make sure your income does not exceed 400% of the FPL in 2026," Tidgren said. "If it does and you received advance premium tax credits, you may have to repay the entire advance credit."

Farmers weighing an entity conversion in 2026 will need to run the payment-limit arithmetic before filing any paperwork, because the new flexibility rewards structure only when it satisfies active-engagement and eligibility tests.