USDA Announces Loan Funding Availability for Socially Disadvantaged Farmers and Ranchers

May 27, 2021 | Kitt Tovar Jensen

UPDATE: On June 10, a judge from the Eastern District of Wisconsin granted a motion for a temporary restraining order halting the nationwide implementation of the loan forgiveness program for socially disadvantaged farmers. The plaintiffs, twelve white farmers and ranchers from nine different states, claim the program violates the Equal Protection Clause of the U.S. Constitution. Faust v. Vilsack, Case No. 21-C-548 (E.D. Wis. June 10, 2021).

On May 21, 2021, the USDA announced the availability of funding for eligible producers with direct loans under the Farm Loan Programs (FLP) and Farm Storage Facility Loan Program (FSFL). As part of the March 11, 2021, American Rescue Plan Act (ARPA), Congress set aside funding and authorized the Farm Service Agency (FSA) to pay up to 120 percent of all eligible loans balances made to “socially disadvantaged” producers. The notice of available funding (NOFA) provides more details on this loan payment assistance program.

Eligibility

Eligible recipients must be a borrower or co-borrower with an outstanding balance as of January 1, 2021, on an eligible loan. The recipient must be a member of a “socially disadvantaged” group, defined in 7 U.S.C. § 2279(a)(6) as “a group whose members have been subjected to racial or ethnic prejudice because of their identity as members of a group without regard to their individual qualities.” This includes producers who are American Indians or Alaskan Natives, Asian Americans, Black or African Americans, Native Hawaiians or Pacific Islanders, and Hispanics or Latinos.

According to the NOFA, “[t]he Secretary of Agriculture will determine on a case-by-case basis whether additional groups qualify under this definition in response to a written request with supporting explanation.” For entities and married couples, at least person individually liable for the debt must qualify as a member of a socially disadvantaged group. An estate of a deceased eligible recipient may also qualify. Eligible recipients should ensure that their demographic and contact information in FSA records are up to date.

Eligible loans include FSFL loans; FLP loans such as Conservation loans, Emergency loans, Farm Ownership loans (including Down Payment loans), Grazing loans, Irrigation and Drainage loans, Operating loans (including Youth loans and Microloans), and Soil and Water loans; and FLP direct non-program loan and Softwood Timber Loans where the original loan was issued under the Consolidated Farm and Rural Development Act.

FSA Notification

FSA will send a receipt of payment offer to primary borrowers and eligible recipients within 45 days of the NOFA publication in the Federal Register. The offer notice will include: information on borrower eligibility; FSA’s proposed payment distribution and calculation; the remaining loan balance on ineligible loans; loans, such as guaranteed FLP loans, which will be addressed in a forthcoming NOFA; and a statement on the potential impact of payments during bankruptcy. The offer notice will also request direct deposit information.

The eligible recipient can choose to accept the offer, schedule a meeting with FSA to discuss the offer, or decline the offer. FSA will send a reminder notification 30 and 60 days from the date of the initial offer. At this time, FSA has not established a final deadline to accept. If the agency does so, borrowers will receive a final notice at least 30 days before the deadline.

Payments

FSA will directly apply the payment amount necessary to pay off eligible loans. The remaining 20 percent will be made according to the offer notice. Payments made on eligible loans after January 1, 2021, will be refunded for borrowers who have accepted the offer. The USDA anticipates payments will begin in June and continue on a rolling basis.

Borrowers should be aware of tax and bankruptcy implications. The entire loan payment amount will be considered income and must be reported on form IRS-1099 G.

Guaranteed Loans and Remaining Loan Balances

A separate NOFA will be issued with more information on guaranteed loans. It will also address loans that no longer have collateral or recipients who no longer have an active farming operation. FSA will address those cases separately as the producers may have more complicated tax liability. FSA believes those borrowers will make up about five percent of cases.

For more information visit: https://www.farmers.gov/americanrescueplan