Legislative and Policy Analysis
Section 10308: Adjusted gross income limitation
What This Section Actually Does
Section 10308 changes the federal farm-program adjusted gross income rule in a targeted way. It does not repeal the general $900,000 average adjusted gross income limit for all farm-program benefits. Instead, it creates an exception for certain disaster and conservation-related payments when a person or legal entity earns at least 75 percent of average gross income from farming, ranching, or silviculture activities.[1]
Under the underlying statute, a person or legal entity generally is not eligible for covered commodity and conservation program benefits if average adjusted gross income exceeds $900,000, calculated over the three taxable years preceding the most immediately preceding complete taxable year.[2] Section 10308 adds a new exception to that rule for “excepted payments or benefits,” including certain Supplemental Agricultural Disaster Assistance payments, Noninsured Crop Disaster Assistance Program benefits, and covered conservation payments or benefits received on or after October 1, 2024.[3]
The section also defines “farming, ranching, or silviculture activities” broadly. The definition includes agri-tourism, direct-to-consumer marketing of agricultural products, sale of agricultural equipment owned by the person or entity, and other agriculture-related activities as determined by the Secretary of Agriculture.[4]
In practical terms, this section says:
| Policy Question | Before Section 10308 | After Section 10308 |
|---|---|---|
| Does the $900,000 AGI limit still exist? | Yes. | Yes, for many covered benefits. |
| Can higher-income operations qualify for certain disaster or conservation benefits? | Generally no, unless another waiver applied. | Yes, for specified benefits if at least 75 percent of average gross income comes from farming, ranching, or silviculture. |
| Which payments are most directly affected? | Disaster, NAP, and conservation benefits were generally subject to the AGI limit, with a limited environmental waiver for some conservation benefits. | Specified disaster, NAP, and conservation benefits can bypass the AGI limit for operations meeting the 75 percent farm-income test. |
| Does the rule apply to hobby or investor landowners with mostly nonfarm income? | The $900,000 AGI limit could block eligibility. | They still may be blocked if less than 75 percent of average gross income comes from farming, ranching, or silviculture. |
Legal Mechanics
Section 10308 amends Section 1001D(b) of the Food Security Act of 1985, codified at 7 U.S.C. 1308-3a(b).[5] It first changes the existing limitation clause so that the $900,000 AGI rule is subject not only to the existing waiver in paragraph (3), but also to the new exception in paragraph (4).[6]
It then adds paragraph (4), titled “Exception for certain operations.” The new paragraph defines an “excepted payment or benefit” as:
| Category | Statutory Reference | Plain-English Description |
|---|---|---|
| Supplemental Agricultural Disaster Assistance | Subtitle E of title I of the Agricultural Act of 2014, 7 U.S.C. 9081 et seq. | Livestock, forage, tree, and other disaster-related assistance programs. |
| Noninsured Crop Disaster Assistance Program | 7 U.S.C. 7333 | Disaster assistance for crops not covered by federal crop insurance. |
| Conservation benefits | Payments or benefits described in 7 U.S.C. 1308-3a(b)(2)(C) received on or after October 1, 2024 | Covered conservation program payments and benefits under listed farm bills and Title XII of the Food Security Act of 1985. |
The key operative test is:
flowchart TD
A[Producer or legal entity applies for covered USDA payment] --> B{Is the payment an excepted payment or benefit?}
B -- No --> C[$900,000 average AGI limit applies]
B -- Yes --> D{Does at least 75% of average gross income come from farming, ranching, or silviculture?}
D -- Yes --> E[$900,000 AGI limit does not apply to that excepted payment]
D -- No --> C
Day-to-Day Government Process Changes
This section changes how USDA’s Farm Service Agency and Natural Resources Conservation Service screen certain applicants. USDA already administers AGI eligibility through certification, consent, and verification processes, including AGI certifications that must generally be provided at least once every three years.[7] Section 10308 adds a second eligibility question for certain applicants: not only “Is average AGI above $900,000?” but also “Does at least 75 percent of average gross income derive from farming, ranching, or silviculture?”
That means county offices, state offices, and national program administrators will likely need to adjust forms, software logic, training materials, and review procedures. USDA’s public AGI guidance now states that the $900,000 average AGI limitation was updated by the Working Families Tax Cuts Act, also known as the One Big Beautiful Bill Act, and that the limitation applies to most FSA and NRCS programs.[8] USDA’s guidance also states that participants in ELAP, LFP, LIP, NAP, TAP, and conservation payments or benefits under listed conservation authorities may be exempt from the average AGI limitation if they derive 75 percent or more of average gross income from farming, ranching, or silviculture activities.[9]
Day-to-day changes may include:
| Government Function | Likely Change |
|---|---|
| Applicant intake | USDA staff must identify whether the requested payment is an “excepted payment or benefit.” |
| AGI review | Staff must still screen for the $900,000 average AGI limit but must also determine whether the new 75 percent farm-income exception applies. |
| Documentation | Applicants above the $900,000 AGI threshold may need CPA, attorney, tax, or other acceptable documentation showing income composition. |
| Program software | Eligibility systems need decision logic distinguishing commodity payments from disaster, NAP, and covered conservation benefits. |
| Compliance and audits | USDA’s targeted audit procedures may need to include review of whether claimed farm, ranch, silviculture, agri-tourism, direct-marketing, or equipment-sale income qualifies under the new definition. |
The administrative burden is likely mixed. Some applicants who previously would have been denied at the AGI screen may now proceed, reducing disputes over the hard $900,000 cutoff. But USDA staff may face more complex income-composition reviews, especially for diversified farms with agri-tourism, direct-to-consumer sales, equipment sales, custom work, forestry income, or related business entities.
Impact on Consumers
The consumer impact is indirect. This section does not create a consumer rebate, tax credit, food assistance benefit, or price control. It affects which agricultural producers can receive certain USDA disaster and conservation payments.
Consumers could see modest indirect effects in three areas:
| Consumer Pathway | Potential Effect |
|---|---|
| Farm disaster recovery | Larger or higher-revenue farm operations that meet the 75 percent farm-income test may remain eligible for disaster support, which can help maintain production capacity after droughts, floods, freezes, wildfire, livestock losses, or other covered events. |
| Food supply stability | By allowing some high-AGI but farm-dependent operations to receive disaster and conservation assistance, the section could support continuity for producers of food, fiber, and livestock products. |
| Consumer prices | Any price effect is likely diffuse and difficult to isolate because commodity prices are shaped by weather, global markets, input costs, crop insurance, trade, storage, transportation, and many other federal programs. |
The largest consumer-facing rationale is resilience. If a farm has high gross and adjusted income because it is a large, capital-intensive operation, the old AGI screen could deny some support even when most income came from farming. Section 10308 treats those operations differently from high-income landowners or investors whose income is mostly nonfarm.
Impact on Businesses
The main business beneficiaries are farm, ranch, forestry, and diversified agricultural operations with average AGI above $900,000 but at least 75 percent of average gross income from farming, ranching, or silviculture.[10]
Potentially affected businesses include:
| Business Type | Likely Impact |
|---|---|
| Large family farms | May become eligible for specified disaster, NAP, and conservation benefits despite exceeding $900,000 in average AGI. |
| Ranches and livestock operations | May benefit through disaster programs such as livestock or forage-related assistance when they meet the 75 percent income test. |
| Forestry and silviculture operations | May benefit because silviculture is expressly included in the income test. |
| Direct-market farms | The definition includes direct-to-consumer marketing of agricultural products, helping diversified operations that sell through farm stands, CSAs, farmers markets, or online channels. |
| Agri-tourism operations | Agri-tourism is expressly included, so qualifying farms with tourism income may count that income toward the 75 percent test. |
| Nonfarm investors and passive landowners | Less likely to benefit if most income comes from nonfarm sources. |
For accountants, attorneys, lenders, and farm-management advisers, the section increases the importance of documenting income sources. The statute’s use of “average gross income” for the 75 percent test is important because it is not identical to “average adjusted gross income.” Producers may need professional support to classify income correctly across tax years and entities.
Environmental and Climate Impact
Section 10308 could have a meaningful environmental and climate impact because it extends the AGI exception to covered conservation payments and benefits received on or after October 1, 2024.[11] Covered conservation programs can support practices such as erosion control, nutrient management, grazing management, habitat protection, water-quality improvements, wetlands conservation, and other land stewardship activities, depending on the program and contract.
The environmental effect depends on implementation:
| Environmental Outcome | How Section 10308 Could Affect It |
|---|---|
| Conservation access for large operations | Larger farm-dependent operations that exceed $900,000 AGI may become eligible for certain conservation assistance if they meet the 75 percent income test. |
| Land and water benefits | If newly eligible operations adopt conservation practices, the section could increase acres under conservation practices, improve soil health, reduce runoff, or protect habitat. |
| Climate resilience | Conservation practices funded through USDA programs may improve drought resilience, water retention, grazing management, and soil carbon outcomes, though results vary by practice and region. |
| Equity in conservation funding | More eligibility for high-income operations could increase competition for finite conservation dollars unless appropriations or allocations are sufficient. Smaller producers could face more competition in oversubscribed programs. |
| Environmental targeting | USDA will need to ensure that eligibility expansion does not weaken environmental prioritization, ranking, or cost-effectiveness standards. |
The key tradeoff is that large operations often control large acreages, so enabling them to participate in conservation programs can produce significant landscape-scale benefits. But if program funding is capped or oversubscribed, expanding eligibility to higher-income operations could shift some funding away from smaller or historically underserved producers unless USDA ranking rules, set-asides, or funding allocations protect those priorities.
The prior law already included a case-by-case waiver allowing the Secretary of Agriculture to waive the AGI limit for certain conservation benefits if environmentally sensitive land of special significance would be protected.[12] Section 10308 is broader because it creates a categorical exception for certain farm-dependent operations, rather than requiring a special-significance waiver for each qualifying conservation case.
Who Is Most Likely to Notice the Change?
| Stakeholder | What They May Notice |
|---|---|
| Producers above $900,000 average AGI | New eligibility pathway for specified disaster, NAP, and conservation benefits if the 75 percent farm-income test is met. |
| USDA county offices | More income-source documentation and eligibility determinations. |
| CPAs and attorneys | More requests to classify income and support AGI or gross-income certifications. |
| Conservation districts and technical service providers | Potentially more eligible conservation applicants, including larger operations. |
| Smaller producers | Possible increased competition for conservation program dollars if funding is limited. |
| Environmental groups | Mixed implications: more acres may be eligible, but funding distribution and environmental ranking become more important. |
Bottom Line
Section 10308 creates a significant exception to the federal farm-program AGI eligibility screen. It keeps the general $900,000 average AGI limitation in place but says that the limit will not apply to certain disaster, NAP, and conservation payments when at least 75 percent of a person’s or entity’s average gross income comes from farming, ranching, or silviculture. The section is most important for large, farm-dependent operations that are too high-income for the old AGI screen but still derive most income from agricultural production or closely related activities.
For government, the change means more nuanced eligibility reviews. For consumers, the effects are indirect and mostly tied to farm resilience and supply stability. For businesses, the section expands access to certain USDA support for larger agricultural operations. For the environment and climate, the section could help conservation practices reach more acres, but it could also intensify competition for limited conservation funding unless USDA implementation preserves strong environmental targeting and access for smaller and underserved producers.
Key References and Sourcing
| Source | Relevance |
|---|---|
| Senate Budget Committee, The One Big Beautiful Bill Act text | Primary bill text for Section 10308 and surrounding commodity-title provisions. |
| U.S. Code, 7 U.S.C. 1308-3a | Current codified text of the AGI limitation, including the Section 10308 amendment. |
| USDA Farm Service Agency, Adjusted Gross Income | USDA implementation guidance describing the $900,000 AGI limit and the new 75 percent farm-income exemption for certain programs. |
| USDA Farm Service Agency, Average Adjusted Gross Income Certification and Verification | USDA fact sheet explaining AGI certification, verification, and affected FSA and NRCS programs. |
| Iowa State University Center for Agricultural Law and Taxation, Reviewing the Agricultural Provisions in the One Big Beautiful Bill Act | Secondary agricultural-law analysis summarizing Section 10308 and related farm-program changes. |
| USDA Economic Research Service, Title I: Crop Commodity Program Provisions | Background on commodity program eligibility, payment limits, and AGI requirements in farm commodity policy. |
| Congressional Research Service, U.S. Farm Program Eligibility and Payment Limits | Background on farm-program eligibility, payment limits, AGI rules, and administration of payment eligibility. |
[1] Senate Budget Committee, “The One Big Beautiful Bill Act,” Section 10308, https://www.budget.senate.gov/imo/media/doc/the_one_big_beautiful_bill_act.pdf.
[2] U.S. Code, “7 U.S.C. 1308-3a: Adjusted gross income limitation,” current text describing the $900,000 limitation and three-year average AGI calculation, https://uscode.house.gov/view.xhtml?req=%28title%3A7+section%3A1308-3a+edition%3Aprelim%29.
[3] U.S. Code, “7 U.S.C. 1308-3a(b)(4): Exception for certain operations,” defining excepted payments and benefits, https://uscode.house.gov/view.xhtml?req=%28title%3A7+section%3A1308-3a+edition%3Aprelim%29.
[4] U.S. Code, “7 U.S.C. 1308-3a(b)(4)(A)(ii): Farming, ranching, or silviculture activities,” https://uscode.house.gov/view.xhtml?req=%28title%3A7+section%3A1308-3a+edition%3Aprelim%29.
[5] Senate Budget Committee, “The One Big Beautiful Bill Act,” Section 10308 amendment to Section 1001D(b) of the Food Security Act of 1985, https://www.budget.senate.gov/imo/media/doc/the_one_big_beautiful_bill_act.pdf.
[6] U.S. Code, “7 U.S.C. 1308-3a(b)(1),” showing the limitation is subject to paragraphs (3) and (4), https://uscode.house.gov/view.xhtml?req=%28title%3A7+section%3A1308-3a+edition%3Aprelim%29.
[7] U.S. Code, “7 U.S.C. 1308-3a(c): Enforcement,” requiring certification or other documentation at least once every three years and authorizing denial of benefits for noncompliance, https://uscode.house.gov/view.xhtml?req=%28title%3A7+section%3A1308-3a+edition%3Aprelim%29.
[8] USDA Farm Service Agency, “Adjusted Gross Income,” USDA guidance on the $900,000 AGI limitation and OBBBA update, https://www.fsa.usda.gov/tools/informational/payment-eligibility/adjusted-gross-income.
[9] USDA Farm Service Agency, “Adjusted Gross Income,” USDA guidance listing ELAP, LFP, LIP, NAP, TAP, and conservation payments or benefits that may qualify for the 75 percent farm-income exemption, https://www.fsa.usda.gov/tools/informational/payment-eligibility/adjusted-gross-income.
[10] Iowa State University Center for Agricultural Law and Taxation, “Reviewing the Agricultural Provisions in the One Big Beautiful Bill Act,” discussion of Section 10308 AGI limitation, https://www.calt.iastate.edu/post/reviewing-agricultural-provisions-one-big-beautiful-bill-act.
[11] U.S. Code, “7 U.S.C. 1308-3a(b)(2)(C) and (b)(4),” covered conservation benefits and new exception for certain payments received on or after October 1, 2024, https://uscode.house.gov/view.xhtml?req=%28title%3A7+section%3A1308-3a+edition%3Aprelim%29.
[12] U.S. Code, “7 U.S.C. 1308-3a(b)(3): Waiver,” case-by-case waiver for environmentally sensitive land of special significance, https://uscode.house.gov/view.xhtml?req=%28title%3A7+section%3A1308-3a+edition%3Aprelim%29.
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