On Monday, March 27, 2023, USDA announced additional assistance for distressed farmers facing financial risk. Beginning in April, USDA will provide approximately $123 million in additional automatic financial assistance for qualifying Farm Loan Program (FLP) direct loan borrowers who are facing financial risk, as part of the $3.1 billion to help distressed farm loan borrowers that was provided through Section 22006 of the Inflation Reduction Act (IRA). Distressed borrower’s eligibility for these new categories of automatic payments will be determined based on their circumstances as of March 27, 2023.
The amount of new assistance a distressed borrower receives will be based on the first category of distress for which they qualify below:
1) Assistance to borrowers whose interest owed on their qualifying direct FLP loan debt exceeds the principal owed. This assistance will be determined on a loan-by-loan basis and will be equal to the outstanding interest as of March 27, 2023, on those loans.
2) Assistance to FLP direct loan borrowers who were past due on a qualifying direct loan as of September 30, 2022, but by fewer than 60 days, or became delinquent between September 30, 2022, and October 18, 2022. Qualifying borrowers are those who remain delinquent on those loans today. This assistance will be equal to the amount of the delinquency and the next installment for all direct FLP loans held by the borrower, not to exceed the remaining balance.
3) Assistance to borrowers who restructured, or who have accepted an offer to restructure, a qualifying direct FLP loan after February 28, 2020 through primary loan servicing available through FSA. This assistance will be equal to any outstanding delinquency and the next installment for all direct FLP loans held by the borrower, not to exceed the remaining balance. For any borrowers who have accepted an offer to restructure, payment will be equal to the next installment for all direct FLP loans post-restructure.
Distressed borrowers who qualify for the above forms of assistance and are currently in bankruptcy will be addressed case-by-case as the review process announced in October 2022 for complex cases.
Similar to the automatic payments announced in October 2022, qualifying borrowers will receive an individual letter detailing the assistance as payments are made.
Update on Previous Assistance Announced in October 2022 for Complex Cases:
USDA continues to conduct a case-by-case review of about 1,600 complex cases for potential initial relief payments, including cases of borrowers in foreclosure or bankruptcy.
Additionally, USDA is making payments using separate pandemic relief funding totaling roughly $66 million on over 7,000 direct loans to borrowers who used the USDA Farm Service Agency’s disaster-set-aside option during the COVID-19 pandemic. The majority of these payments have been processed and USDA anticipates it will complete all such payments in April 2023.
Important Update on Potential Tax Implications for IRA Payments Received:
In early April 2023, USDA will send a specific set of revised tax documents, educational materials and resources to borrowers who 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.
USDA 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.
For more details on the Inflation Reduction Act Section 22006, including process and payments to date, please see USDA’s fact sheet and news release below.
Inflation Reduction Act Section 22006 factsheet.
News release posted on March 27, 2023.
Rural Coalition will continue to provide updates on assistance on direct farm loans from USDA as they become available. Please email Rural Coalition atFarmers@ruralco.org if you have specific questions.
We urge the organizations and producers receiving this message to share with other farmers and ranchers who would benefit.
In Cooperation,
-The Rural Coalition Team