Most
farm operators and peanut quota owners are cash-basis taxpayers. For
cash-basis taxpayers, Treasury Department regulation (Sec. 1.451-2(a) states that
income is considered to be received
by the taxpayer when it becomes available to him, regardless of whether it is
in his possession.
To clarify
the issue of constructive receipt with respect to production flexibility contract
(PFC) payments in the 1996 Farm Bill, Congress stated:
"Any option to accelerate the receipt of any
payment under production flexibility contract which is payable under the Federal
Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 7200 [7201] et seq.),
as in effect on the date of the enactment of this Act [Dec. 17, 1999], shall
be disregarded in determining the taxable year for which such payment is properly
includible in gross income for purposes of the Internal Revenue Code of 1986
{26 U.S.C. 1 et seq]."
Congress made notice with the above statement
that PFC payments would be included in the taxable income of recipients in the
year they were received by taxpayers.
In Farm Bill 2002, Congress made the following
statements.
With Regard to Direct Payments:
"At the option of the producers on a farm, up
to 50 percent of the direct payment for any of the 2003 through 2007 crop years
shall be paid to the producers in advance. The
producers shall select the month within which the advance payment for a crop
year will be made. The month selected may be any month during the period beginning
on December 1 of the calendar year before the calendar year in which the crop
is harvested through the month within which the direct payment would otherwise
be made." (Italics added)
With Regard to Peanut Quota Buyout Program Payments:
TIME FOR PAYMENT-
(1) PAYMENT IN INSTALLMENTS- The payments required
under the contracts shall be provided in 5 equal installments not later than
September 30 of each of fiscal years 2002 through 2006.
(2) SINGLE PAYMENT- At the request of an eligible
peanut quota holder entitled to payments under a contract, the Secretary shall
provide the entire payment amount determined under subsection (d) with respect
to the eligible peanut quota holder for the 5 fiscal years in a single lump
sum during the fiscal year specified
by the eligible peanut quota holder.
(Italics added)
By comparing the statement from the 1996 Farm
Bill and the statements from Farm Bill 2002, it can be seen that it is the intent
of Congress to allow taxpayers to report Direct Payments and Peanut Quota Buyout
Program Payments in the year which they are actually received.
Department of Agricultural and Applied Economics
Cooperative Extension Service, The University of Georgia
September 4, 2002
Back to previous page
Back to Farm
Bill 2002: Presentations
Back
to Extension Agricultural
& Applied Economics Homepage