By Mary Hightower
University of Arkansas Division of Agriculture

Fast Facts

  • Ballard describes changes in USDA payment limitations for LLCs
  • Tidgren discusses IRS code changes that can help farmers

FAYETTEVILLE, Ark. — Farms that receive safety net or conservation payments from the U.S. Department of Agriculture need to understand changes in payment limitations due to the One Big Beautiful Bill Act before deciding whether to convert their operation from a partnership to a limited liability company, or LLC, or S corporation.

Two side-by-side headshots. On the left, a smiling man with brown hair wears a white dress shirt and a striped yellow and blue tie. On the right, a smiling woman with blonde bob-cut hair wears a red blazer over a matching red turtleneck and layered silver necklaces.

Grant Ballard and Kristine Tidgren provided updates on farm-related taxes. (UADA image)

Grant Ballard, partner at Ark Ag Law, PLLC, and Kristine Tidgren, director of Iowa State University’s Center for Agricultural Law and Taxation, provided 2026 updates on USDA’s Payment Limitations, Eligibility, & Ag Tax Considerations during the September webinar by the National Agricultural Law Center.

USDA payment limitations are the maximum annual dollar amounts a person or legal entity can receive directly or indirectly through conservation or federal farm safety net programs such as Price Loss Coverage and Agriculture Risk Coverage, better known as PLC and ARC.

“For many years, it has been accepted that partnerships and joint ventures could obtain multiple payment limits,” Ballard said. “For example, a partnership of three individuals, where each individual was actively engaged in farming, could collect three payment limits.”

However, the regulations treated LLCs differently. If three individuals were engaged in farming as a single LLC, it would be limited to a single payment limit.

The One Big Beautiful Bill Act changed that and Ballard said the change to treat LLCs and S corporations the same as partnerships probably grew out of “pushback from accountants and attorneys that wanted to organize farm operations in LLCs.”

“It was framed as one of equity,” he said. “Why are we treating these partnerships different when, in fact, the businesses operate the same way?

“That’s a big change,” Ballard said.

Another change “is a provision for annual increases to payment limits based on the Consumer Price Index,” he said.

“There’s a process now that hasn’t existed in the past, where the payment limit amounts may increase annually, where in the past, the payment limitations were established, usually in a Farm Bill,” Ballard said. “And they were fixed until the next Farm Bill, so now there is a way for the payment limits to increase on their own.”

He also noted that recent regulatory changes include some exceptions to certain adjusted gross income requirements for certain programs.

The Working Families Tax Cuts Act broadened the definition of farming income, and, as a result, diversified producers may qualify for exceptions under USDA’s average adjusted gross income requirements.

Ballard said one of the most common questions he receives is whether a farm operation should change its corporate structure.

“I advise everyone not to make any changes to their current operation until they understand the payment limitations rules, and they need to understand why they think they need to make a change. That’s the first thing,” he said.

To read the rest of this news release, click here.

Share: