Many Producers with 2020 or 2021 Disaster Losses Eligible for ERP

June 14, 2022 | Kristine A. Tidgren

Update: Remember, the deadline for most farmers to submit their application for ERP is July 22, 2022.  On July 14, 2022, seven Senators sent a letter to USDA Secretary Vilsack, requesting that FSA consider several problems identified with the calculation and distribution of ERP payments.

President Biden signed the Extending Government Funding and Delivering Emergency Assistance Act (P.L. 117-43) into law on September 30, 2021. It authorized $10 billion to assist agricultural producers impacted by wildfires, droughts, hurricanes, winter storms, and other eligible disasters experienced during calendar years 2020 and 2021. The USDA has determined that the money will be funding two new programs, the Emergency Livestock Relief Program (ELRP) and the Emergency Relief Program (ERP). We detail these programs below.

Emergency Livestock Relief Program

Overview

USDA unveiled the Emergency Livestock Relief Program (ELRP) in April of 2022. The ELRP allocated $750 million to assist ranchers forced to pay increased supplemental feed costs because of forage losses due to drought or wildfire in 2021. Phase one of this program provides payments to producers who participated in the 2021 Livestock Forage Disaster Program (LFDP). The FSA is using livestock inventories and forage acreage reported on the 2021 CCC-853 LFDP Application to determine payment amounts.  FSA is not accepting applications for the ELRP.  Instead, FSA has been automatically calculating and sending the payments based upon the producer’s 2021 LFDP payment, as long as all proper paperwork is already on file. Producers have no need to contact the FSA office to receive this payment.

Phase one ELRP payments equal the eligible livestock producer’s gross 2021 LFDP calculated payment multiplied by a payment percentage. The payment percentage for historically underserved producers, including beginning farmers, veterans, and limited resource producers, is 90 percent. The payment percentage for other producers is 75 percent.

USDA is evaluating phase two options for those livestock producers who may need additional assistance. Those producers who did not complete a 2021 LFDP application should contact their FSA office to stay abreast of future options.

More information about the ELRP is available here.

Payment Limitations and Form FSA-510

Although adjusted gross income limitations do not apply to the ELRP, payment limitations do. Generally, a person or legal entity (other than a partnership or joint venture) can receive up to $125,000 in ELRP payments if their adjusted gross farm income is less than 75 percent of the average AGI for tax years 2017, 2018, and 2019. For those with AGI from farming at 75 percent or more, this payment limitation increases to $250,000. To receive the enhanced limit, producers must engage a CPA or attorney to complete Form FSA-510, certifying that 75 percent or more of their AGI is from farming (see below for helpful charts and tables).

Note: Producers who would have been eligible for a 2021 LFDP payment, but for the AGI limit will be eligible to receive an ELRP payment. The payment is based upon the 2021 calculated payment amount, even if that payment was never made.

Emergency Relief Program (ERP)

On May 16, 2022, USDA announced that it was allocating $6 billion to fund a new Emergency Relief Program (ERP) to assist producers with crop yield and value losses from natural disasters in 2020 and 2021. The program has begun with streamlined “phase one” payments.

Specifically, these ERP phase one payments cover losses to trees, bushes, vines, and all crops for which federal crop insurance or noninsured crop disaster assistance program coverage was available, except for crops intended for grazing. Qualifying natural disaster events include the following: wildfires, hurricanes, floods, derechos, excessive heat, winter storms, freeze (including a polar vortex), smoke exposure, excessive moisture, qualifying drought, and related conditions. 

Application Process

At the end of May, USDA sent out 303,000 pre-filled applications to producers who received an indemnity under crop insurance policies or a payment under NAP in 2020 or 2021. Producers received a separate application for each program year. The application contains eligibility information and estimated payment calculations. This application is not confirmation that the producer is eligible for a phase one payment. Producers must complete the application and return a signed version to the FSA office. The FSA estimates the application will take only 15 minutes to complete. Producers who received the first batch of pre-filled applications are required to return the completed applications to FSA by July 22, 2022. Producers may finalize their applications by submitting them via fax, email, or in person to an FSA County Office.  All producers certifying to a share must sign the application. Producers with NAP coverage will receive their pre-filled applications later in the summer.

In addition to finalizing the applications, producers must ensure that the following forms are on file with the FSA within 60 days of the ERP phase one deadline:  

  • Form AD-2047, Customer Data Worksheet. 
  • Form CCC-902, Farm Operating Plan for an individual or legal entity.   
  • Form CCC-901, Member Information for Legal Entities (if payment is made to an entity).   
  • Form FSA-510, Request for an Exception to the $125,000 Payment Limitation for Certain Programs (if 75% or more of AGI is from farming).   
  • Form CCC-860, Socially Disadvantaged, Limited Resource, Beginning and Veteran Farmer or Rancher Certification, if applicable, for the 2021 program year.   
  • Form AD-1026 Highly Erodible Land Conservation (HELC) and Wetland Conservation (WC) Certification) for the ERP producer and applicable affiliates. 

Note: The initial pre-filled applications were completed by FSA based upon claims and loss data on file with the RMA as of May 2, 2022. In late summer, a second round of pre-filled applications or letters will be sent to eligible producers with updated claims information. Specifically, claims data for the Supplemental Coverage Option (SCO), Enhanced Coverage Option (ECO), Stacked Income Protection Plan (STAX), Margin Protection Plan, (MP) or Area Risk Protection Insurance (ARPI) was not complete and crop/units including these coverages were not included in the initial phase one pre-filled application.

Payment Calculations

RMA and FSA are working together to calculate ERP phase one payments based upon the type and level of crop insurance coverage of the producer. The producer’s loss is calculated based upon the loss procedures for the type of coverage held, but an “ERP factor” is substituted for the coverage level. This amount is then adjusted by removing the crop insurance and NAP payments already received for those losses, minus fees and premiums. The ERP factors for crop insurance and NAP coverage are shown below:

To ensure that total ERP payments do not exceed funding levels, phase one ERP payments will be prorated by 75 percent. NAP payments will not be prorated. Additionally, payments to historically underserved producers, including beginning, limited resource, socially disadvantaged and veteran farmers and ranchers are increased by 15% of the calculated payment. These producers must file a Form CCC-860 to qualify for the increased payment.

Requirement for Future Insurance

Anyone receiving an ERP phase one payment, including those receiving such payments for tree, bush, or vine policies, must purchase crop insurance (or NAP coverage if crop insurance is not available) for the next two available crop years.

Phase Two

Phase two of the ERP will cover producers who did not participate in or receive sufficient payments through the phase one program. USDA has not yet published phase two details.

Payment Limitations

Although adjusted gross income limitations do not apply to the ERP, payment limitations do. Generally, a person or legal entity (other than a partnership or joint venture) can receive up to $125,000 in 2021 ERP payments if their adjusted gross farm income is less than 75 percent of their average AGI for tax years 2017, 2018, and 2019. Likewise, they can receive up to $125,000 in 2020 ERP payments if their adjusted gross farm income is less than 75 percent of their average AGI for tax years 2016, 2017, and 2018.

For those with AGI from farming at 75 percent or more, this payment limitation increases to $900,000 per year for specialty crops and $250,000 per year for all other crops. To receive the enhanced limit, producers must engage a CPA or attorney to complete form FSA-510, certifying that 75 percent or more of their AGI is from farming.

More information about the ERP, including FAQs, is available here.

Form FSA-510

When calculating the percent of AGI derived from farming, the FSA Handbook defines average farm AGI as income or benefits derived from the following sources:

FSA Handbook, 6-PL, Payment Limitation, Payment Eligibility, and Average Adjusted Gross Income (April 2022) further clarifies that Farm AGI is not the same as gross farm income reported to IRS. FSA Farm income is generally net farm income. Likewise, the FSA includes income from the sale of items such as agricultural-related land, breeding livestock, and agricultural conservation easements in this definition. While income from the sale of farm-related equipment is not generally considered farm income, such income must be included in farm AGI if income from farming is at least 66.66 percent of the total AGI from all sources. The following worksheet aids in this calculation:

 

We will continue to monitor implementation of these programs and will post updates as they arise.