IMPORTANT
ALERT DATE:
June 6, 2005 TO:
Family Farm Alliance Members and Allied Interests FROM:
Family Farm Alliance RE:
S. 1118 (Feingold) In what can only be described
as a throwback to debates that were resolved in the early 1990s, Senator Russell
Feingold (D-Wisconsin) has just introduced S. 1118, the “Irrigation Subsidy
Reduction Act of 2005.” The bill
targets water from Reclamation project sources[1]
and would have the effect of increasing the cost of that water to most farmers
receiving project water. The
following has been prepared to alert you of this legislation, briefly summarize
its potential effects to family farmers and ranchers who depend on federal water
projects, and urge that you take immediate action to stop this bill. Senator
Feingold’s Justification for S. 1118 According to the text of the
bill, Senator Feingold believes that: What
Does S. 1118 Actually Do? S. 1118
Redefines who is Entitled to Receive Non-Full Cost Water From Reclamation
Projects - S. 1118 resurrects the abandoned concept of “farm operation.”
As defined by Senator Feingold’s bill, a “farm operation” would be
all land that is under the control or supervision of the same individual(s) or
entity(ies). For example, it
appears that multiple partnerships comprised of the same partners would
constitute a single “farming operation,” even if their farms are completely
separate and distinct. It also
appears that, even if there was only some overlap in membership, the farms of
multiple unrelated entities could be combined into a single “farm
operation.” S.1118
Imposes a “Means Test” That Will Increase Water Costs for Farmers - S.
1118 then provides that the amount of irrigation water from Reclamation project
sources that could be delivered at less than full cost is reduced for any
qualified recipient that reports gross farm income from a single “farm
operation” in excess of $500,000 for a taxable year.
That reduction is determined by dividing $500,000 by the landholder’s
gross farm income for the relevant year, and then multiplying the result by the
number of acres in the “farm operation.”
Although the bill is poorly drafted and creates a great many ambiguities,
Senator Feingold’s intent seems to be to reduce the existing 960-acre limit
for non-full cost water for any landholder with gross farm income over $500,000.
Given the very low profit margins in farming, this “means test” will
likely capture a great many farmers and increase their cost of water. S. 1118
Requires That Tax Returns Must be Filed with the Bureau of Reclamation in Order
to Receive Project Water - Senator Feingold’s bill goes on to require the
annual filing of “certificates of compliance” for “farm operators”
(presumably comparable to the current certification forms for landholders).
It also requires farmers to file (i) copies of any lease or “other
agreement” executed by each of the parties and (ii) a copy of each
landholder’s personal income tax return for any taxable year in which the
landholder (as a lessee or “farm operator”) received irrigation water at
less than full cost. S. 1118
Rescinds Protections Against Government Information Being Used Against Farmers
- This bill directs the Secretary of the Interior, the Secretary of Agriculture
and the Secretary of the Treasury to enter into a memorandum of understanding
that would allow the Bureau of Reclamation to have access to information
collected or maintained by the Department of the Treasury (i.e., the Internal
Revenue Service) and the Department of Agriculture that would “aid enforcement
of the ownership and pricing limitations of Federal reclamation law.” In short, S.
1118 redefines who is entitled to receive non-full cost water from Reclamation
project sources, imposes a means test for the receipt of that water, increases
the cost of water for the vast majority of farmers receiving Reclamation project
water, creates the unprecedented requirement that tax returns must be filed with
Reclamation in order to receive project water, and rescinds longstanding
protections against government information being used to attack farmers. Next
Steps The Family
Farm Alliance intends to vigorously oppose this bill by educating Members of
Congress about the true facts of the Reclamation program and pointing out the
numerous erroneous assumptions underlying S. 1118. We suggest
you contact your senators and representatives as soon as possible to do
likewise. We will keep
you advised of our efforts on this bill and its progress in Congress.\ [1]
It is worth noting that there are no Reclamation projects in Senator
Feingold’s home state of Dear
Supporter of Family Farmers and Ranchers: In
what can only be described as a throwback to debates that were resolved in
the early 1990s, Senator Russell Feingold (D-Wisconsin) last week
introduced S. 1118, the “Irrigation Subsidy Reduction Act of 2005.”
The bill targets water from Reclamation project sources and would have the
effect of increasing the cost of that water to most farmers receiving
project water. The attached alert memo has been prepared to alert
you of this legislation, briefly summarize its potential effects to family
farmers and ranchers who depend on federal water projects, and urge that
you take immediate action to stop this bill. In
short, S. 1118 redefines who is entitled to receive non-full cost water
from Reclamation project sources, imposes a means test for the receipt of
that water, increases the cost of water for the vast majority of farmers
receiving Reclamation project water, creates the unprecedented requirement
that tax returns must be filed with the Bureau of Reclamation in order to
receive project water, and rescinds longstanding protections against
government information being used to attack farmers. The
Family Farm Alliance intends to vigorously oppose this bill by educating
Members of Congress about the true facts of the Reclamation program and
pointing out the numerous erroneous assumptions underlying S. 1118.
We suggest you contact your senators and representatives as soon as
possible to do likewise. The
full text of Senator Feingold’s bill follows. If you have any questions
or comments on this matter, please do not hesitate to contact me by e-mail
for directly by phone at 541-850-9007. Dan
Keppen Executive
Director
Irrigation Subsidy
Reduction Act of 2005 (Introduced in Senate) 109th
CONGRESS 1st
Session S.
1118 IN
THE SENATE OF THE UNITED STATES May
25, 2005 Mr.
FEINGOLD introduced the following bill; which was read twice and referred
to the Committee on Energy and Natural Resources A
BILL Be
it enacted by the Senate and House of Representatives of the SECTION
1. SHORT TITLE. This
Act may be cited as the `Irrigation Subsidy Reduction Act of 2005'. SEC.
2. FINDINGS. Congress
finds that-- (1)
the Federal reclamation program has been in existence for over 90 years,
with an estimated taxpayer investment of over $70,000,000,000; (2)
the program has had and continues to have an enormous effect on the water
resources and aquatic environments of the western States; (3)
irrigation water made available from Federal water projects in the West is
a very valuable resource for which there are increasing and competing
demands; (4)
the justification for providing water at less than full cost was to
benefit and promote the development of small family farms and exclude
large corporate farms, but this purpose has been frustrated over the years
due to inadequate implementation of subsidy and acreage limits; (5)
below-cost water prices tend to encourage excessive use of scarce water
supplies in the arid regions of the West, and reasonable price increases
to the wealthiest western farmers would provide an economic incentive for
greater water conservation; (6)
the Federal Government has increasingly applied eligibility tests based on
income for Federal entitlement and subsidy programs, measures that are
consistent with the historic approach of the reclamation program's acreage
limitations that seek to limit water subsidies to smaller farms; and (7)
including a means test based on gross income in the reclamation program
will increase the effectiveness of carrying out the family farm goals of
the Federal reclamation laws. SEC.
3. AMENDMENTS. (a)
Definitions- Section 202 of the Reclamation Reform Act of 1982 (43 U.S.C.
390bb) is amended-- (1)
by redesignating paragraphs (7), (8), (9), (10), and (11) as paragraphs
(9), (10), (11), (12), and (13), respectively; (2)
in paragraph (6), by striking `owned or operated under a lease which' and
inserting `that is owned, leased, or operated by an individual or legal
entity and that'; (3)
by inserting after paragraph (6) the following: `(7)
LEGAL ENTITY- The term `legal entity' includes a corporation, association,
partnership, trust, joint tenancy, or tenancy in common, or any other
entity that owns, leases, or operates a farm operation for the benefit of
more than 1 individual under any form of agreement or arrangement. `(8)
OPERATOR- `(A)
IN GENERAL- The term `operator'-- `(i)
means an individual or legal entity that operates a single farm operation
on a parcel (or parcels) of land that is owned or leased by another person
(or persons) under any form of agreement or arrangement (or agreements or
arrangements); and `(ii)
if the individual or legal entity-- `(I)
is an employee of an individual or legal entity, includes the individual
or legal entity; or `(II)
is a legal entity that controls, is controlled by, or is under common
control with another legal entity, includes each such other legal entity. `(B)
OPERATION OF A FARM OPERATION- For the purposes of subparagraph (A), an
individual or legal entity shall be considered to operate a farm operation
if the individual or legal entity is the person that performs the greatest
proportion of the decisionmaking for and supervision of the agricultural
enterprise on land served with irrigation water.'; and (4)
by adding at the end the following: `(14)
SINGLE FARM OPERATION- `(A)
IN GENERAL- The term `single farm operation' means the total acreage of
land served with irrigation water for which an individual or legal entity
is the operator. `(B)
RULES FOR DETERMINING WHETHER SEPARATE PARCELS ARE OPERATED AS A SINGLE
FARM OPERATION- `(i)
EQUIPMENT- AND LABOR-SHARING ACTIVITIES- The conduct of equipment- and
labor-sharing activities on separate parcels of land by separate
individuals or legal entities shall not by itself serve as a basis for
concluding that the farming operations of the individuals or legal
entities constitute a single farm operation. `(ii)
PERFORMANCE OF CERTAIN SERVICES- The performance by an individual or legal
entity of an agricultural chemical application, pruning, or harvesting for
a farm operation on a parcel of land shall not by itself serve as a basis
for concluding that the farm operation on that parcel of land is part of a
single farm operation operated by the individual or entity on other
parcels of land.'. (b)
Identification of Owners, Lessees, and Operators and of Single Farm
Operations- The Reclamation Reform Act of 1982 (43 U.S.C. 390aa et seq.)
is amended by inserting after section 201 the following: SEC.
201A. IDENTIFICATION OF OWNERS, LESSEES, AND OPERATORS AND OF SINGLE FARM
OPERATIONS. `(a)
In General- Subject to subsection (b), for each parcel of land to which
irrigation water is delivered or proposed to be delivered, the Secretary
shall identify a single individual or legal entity as the owner, lessee,
or operator. `(b)
Shared Decisionmaking and Supervision- If the Secretary determines that no
single individual or legal entity is the owner, lessee, or other
individual that performs the greatest proportion of decisionmaking for and
supervision of the agricultural enterprise on a parcel of land-- `(1)
all individuals and legal entities that own, lease, or perform a
proportion of decisonmaking and supervision that is equal as among
themselves but greater than the proportion performed by any other
individual or legal entity shall be considered jointly to be the owner,
lessee, or operator; and `(2)
all parcels of land of which any such individual or legal entity is the
owner, lessee, or operator shall be considered to be part of the single
farm operation of the owner, lessee, or operator identified under
subsection (1).'. (c)
Pricing- Section 205 of the Reclamation Reform Act of 1982 (43 U.S.C.
390ee) is amended by adding at the end the following: `(d)
Single Farm Operations Generating More Than $500,000 in Gross Farm Income- `(1)
IN GENERAL- Notwithstanding subsections (a), (b), and (c), in the case
of-- `(A)
a qualified recipient that reports gross farm income from a single farm
operation in excess of $500,000 for a taxable year; or `(B)
a limited recipient that received irrigation water on or before October 1,
1981, and that reports gross farm income from a single farm operation in
excess of $500,000 for a taxable year; irrigation
water may be delivered to the single farm operation of the qualified
recipient or limited recipient at less than full cost to a number of acres
that does not exceed the number of acres determined under paragraph (2). `(2)
MAXIMUM NUMBER OF ACRES TO WHICH IRRIGATION WATER MAY BE DELIVERED AT LESS
THAN FULL COST- The number of acres determined under this subparagraph is
the number equal to the number of acres of the single farm operation
multiplied by a fraction, the numerator of which is $500,000 and the
denominator of which is the amount of gross farm income reported by the
qualified recipient or limited recipient in the most recent taxable year. `(3)
INFLATION ADJUSTMENT- `(A)
IN GENERAL- The $500,000 amount under paragraphs (1) and (2) for any
taxable year beginning in a calendar year after 2004 shall be equal to the
product of-- `(i)
$500,000, multiplied by `(ii)
the inflation adjustment factor for the taxable year. `(B)
INFLATION ADJUSTMENT FACTOR- The term `inflation adjustment factor' means,
with respect to any calendar year, a fraction the numerator of which is
the GDP implicit price deflator for the preceding calendar year and the
denominator of which is the GDP implicit price deflator for 2004. Not
later than April 1 of any calendar year, the Secretary shall publish the
inflation adjustment factor for the preceding calendar year. `(C)
GDP IMPLICIT PRICE DEFLATOR- For purposes of subparagraph (B), the term
`GDP implicit price deflator' means the first revision of the implicit
price deflator for the gross domestic product as computed and published by
the Secretary of Commerce. `(D)
ROUNDING- If any increase determined under subparagraph (A) is not a
multiple of $100, the increase shall be rounded to the next lowest
multiple of $100.'. (d)
Certification of Compliance- Section 206 of the Reclamation Reform Act of
1982 (43 U.S.C. 390ff) is amended to read as follows: `SEC.
206. CERTIFICATION OF COMPLIANCE. `(a)
In General- As a condition to the receipt of irrigation water for land in
a district that has a contract described in section 203, each owner,
lessee, or operator in the district shall furnish the district, in a form
prescribed by the Secretary, a certificate that the owner, lessee, or
operator is in compliance with this title, including a statement of the
number of acres owned, leased, or operated, the terms of any lease or
agreement pertaining to the operation of a farm operation, and, in the
case of a lessee or operator, a certification that the rent or other fees
paid reflect the reasonable value of the irrigation water to the
productivity of the land. `(b)
Documentation- The Secretary may require a lessee or operator to submit
for the Secretary's examination-- `(1)
a complete copy of any lease or other agreement executed by each of the
parties to the lease or other agreement; and `(2)
a copy of the return of income tax imposed by chapter 1 of the Internal
Revenue Code of 1986 for any taxable year in which the single farm
operation of the lessee or operator received irrigation water at less than
full cost.'. (e)
Trusts- Section 214 of the Reclamation Reform Act of 1982 (43 U.S.C.
390nn) is repealed. (f)
Administrative Provisions- (1)
PENALTIES- Section 224(c) of the Reclamation Reform Act of 1982 (43 U.S.C.
390ww(c)) is amended-- (A)
by striking `(c) The Secretary' and inserting the following: `(c)
Regulations; Data Collection; Penalties- `(1)
REGULATIONS; DATA COLLECTION- The Secretary'; and (B)
by adding at the end the following: `(2)
PENALTIES- Notwithstanding any other provision of law, the Secretary shall
establish appropriate and effective penalties for failure to comply with
any provision of this Act or any regulation issued under this Act.'. (2)
INTEREST- Section 224(i) of the Reclamation Reform Act of 1982 (43 U.S.C.
390ww(i)) is amended by striking the last sentence and inserting the
following: `The interest rate applicable to underpayments shall be equal
to the rate applicable to expenditures under section 202(3)(C).'. (g)
Reporting- Section 228 of the Reclamation Reform Act of 1982 (43 U.S.C.
390zz) is amended by inserting `operator or' before `contracting entity'
each place it appears. (h)
Memorandum of Understanding- The Reclamation Reform Act of 1982 (43 U.S.C.
390aa et seq.) is amended-- (1)
by redesignating sections 229 and 230 as sections 230 and 231; and (2)
by inserting after section 228 the following: `SEC.
229. MEMORANDUM OF UNDERSTANDING. `The
Secretary, the Secretary of the Treasury, and the Secretary of Agriculture
shall enter into a memorandum of understanding or other appropriate
instrument to permit the Secretary, notwithstanding section 6103 of the
Internal Revenue Code of 1986, to have access to and use of available
information collected or maintained by the Department of the Treasury and
the Department of Agriculture that would aid enforcement of the ownership
and pricing limitations of Federal reclamation law.'. 