The U.S. Department of Agriculture announced on March 27 that beginning in April it will provide approximately $123 million in additional, automatic financial assistance for qualifying farm loan program borrowers who are facing financial risk.
The funding is part of $3.1 billion to help distressed farm loan borrowers and is provided through Section 22006 of the Inflation Reduction Act (IRA).
More information about the new categories that make up the $123 million in assistance announced today and the specific amount of assistance a distressed borrower receives can be found described in this fact sheet, IRA Section 22006: Additional Automatic Payments, Improved Procedures, and Policy Recommendations.
The announcement builds on financial assistance offered to borrowers through the same program in October 2022, the USDA said, noting that the
IRA “directed USDA to expedite assistance to distressed borrowers of direct or guaranteed loans administered by USDA’s Farm Service Agency (FSA) whose operations face financial risk. For example, in the October payments, farmers that were 60 days delinquent due to challenges like natural disasters, the pandemic or other unexpected situations were brought current and had their next installment paid to give them breathing room.”
USDA Secretary Tom Vilsack said, “In too many cases, the rules surrounding our farm loan programs may actually be detrimental to helping a borrower get back to a financially viable path. As a result, some are pushed out of farming and others stuck under a debt burden that prevents them from growing or reacting to opportunities. Loan programs for the newest and more vulnerable producers must be about providing opportunity and tailored to expect and manage stumbles and hurdles along the way. Through this assistance, USDA is focusing on generating long-term stability and success for distressed borrowers.”
The October 2022 measure provided some $800 million in initial IRA assistance to more than 11,000 delinquent direct and guaranteed borrowers and approximately 2,100 borrowers who had their farms liquidated and still had remaining debt, the USDA said. The government agency also said it “would conduct case-by-case reviews of about 1,600 complex cases for potential initial relief payments, including cases of borrowers in foreclosure or bankruptcy. These case-by-case reviews are underway.”
As part of the new assistance program, the FSA “intends to provide the new round of relief starting in April to additional distressed borrowers. This will include approximately $123 million in automatic financial assistance for qualifying Farm Loan Program (FLP) direct loan borrowers who meet certain criteria. Similar to the automatic payments announced in October 2022, qualifying borrowers will receive an individual letter detailing the assistance as payments are made. Distressed borrowers’ eligibility for these new categories of automatic payments will be determined based on their circumstances as of today.”
To continue to make sure producers are aware of relief potentially available to them, all producers with open FLP loans will receive a letter detailing a new opportunity to receive assistance if they took certain extraordinary measures to avoid delinquency on their FLP loans, such as taking on more debt, selling property or cashing out retirement accounts. The letter will provide details on eligibility, the specific types of actions that may qualify for assistance, and the process for applying for and providing the documentation to seek that assistance.
USDA said it will continue to “work with the Department of Treasury to help borrowers understand the potential tax implications from the receipt of an IRA payment, including that options may be available to potentially avoid or alleviate any tax burden incurred as a result of receiving this financial assistance.”
To that end, in early April, USDA will send a “specific set of revised tax documents, educational materials and resources to borrowers that received assistance in 2022, including a link to a webinar hosted by a group of farm tax experts to provide education on the options available. USDA cannot provide tax advice and encourages borrowers to consult their own tax professional, but FSA is providing educational materials for borrowers to be aware of the options. USDA has tax-related resources available at farmers.gov/taxes.”
And the FSA is “finalizing changes to its policy handbooks to remove unnecessary hurdles, improve loan making and loan servicing and provide more flexibility on how loans are structured to maximize the opportunities for borrowers. Additional details on those changes can be found in the linked fact sheet and are the start of a broader set of process enhancements.”
