USDA Relief for 2020 and 2021 Losses - Deadline 7/14/23
The USDA released an updated version of the Emergency Relief Program (ERP) that extended coverage to many estate wineries (thanks to the tireless efforts of the Napa Valley Vinters). The filing deadline for the completed application is July 14, 2023.
According to the USDA:
"Emergency Relief Program (ERP) covers losses to crops, trees, bushes and vines due to a qualifying natural disaster event in calendar years 2020 and 2021.
For impacted producers, FSA is administering emergency relief to other crop, high value and specialty crop producers through the following two-phased process:
• Phase 1 leveraged existing Federal Crop Insurance or Noninsured Crop Disaster Assistance Program (NAP) data as the basis for calculating initial payments. (This benefit was provided to those who had crop insurance . They were automatically enrolled in the program.)
• NEW: Phase 2 intends to fill additional assistance gaps and cover eligible producers who did not participate in existing risk management programs.
Benefits
- Limited benefits of up to $125,000 (for Phase 1 and Phase 2 combined)are available for wineries with less than 75% of their income from farming.
- Full benefits apply to wineries who can certify that 75% of their income is from farming qualify for benefits of:
- up to $900,000 for each program year for high value/specialty crops *
- and $250,000 for each program year for all other crops
Note: Recipients of these benefits must purchase crop insurance in the next two available crop years.
Additional details on qualification and calculation details are available here.
Payment limitation details are available here.
*Form FSA-510 is required to qualify for the additional benefits. We created a quick YouTube video on completing this form here.
Phase 2 calculations (applications are due by 7/14/23)
In general, payments for ERP Phase 2 are based on the difference in allowable gross revenue between the selected representative benchmark year(s) and the disaster year(s).
ERP Phase 2 program utilizes:
• Benchmark years: 2018, 2019
• Disaster years: 2020, 2021
Eligibility
"Congress and the USDA have established requirements to ensure that farm program payments only go to farmers who are “actively engaged in farming.” The
2018 Farm Bill extends the payment eligibility and payment limitation requirements for the 2019 through the 2023 program years."
"To be considered as “actively engaged in farming,” a person or legal entity (partnerships, corporations, and so forth) must provide significant contributions to
the farming operation. Contributions include capital, land and/or equipment and active personal labor and/or active personal management. The active personal
management contribution must be critical to the profitability of the farming operation. All contributions to the farming operation must be at risk of loss."
-- USDA payment eligibility factsheet.
How To Determine Crop Value
The USDA provides the following example for wineries:
"Producers who grow their own wine grapes and process the grapes into wine as part of their ordinary operation and do not have sales from the wine grapes to include in their allowable revenue can now include the value of the crop in their allowable gross revenue for both the benchmark and disaster years. The value of the eligible crop is based on the producer’s actual production of the crop and a price for the crop obtained from National Agricultural Statistics Service (NASS) data, and other published prices, such as prices from Risk Management Agency (RMA) and Noninsured Crop Disaster Assistance Program (NAP) and locally published prices based on sales for the applicable year.
Example:
John Doe Wines, LLC is a wine maker that grows PNO grapes to process into wine, they do not sell their grapes. In 2021, John Doe Wines, LLC produced 500 tons of actual production. They are using published pricing from NASS at $552.50/ton to determine the value of the crop at $276,250 for the disaster year.
John Doe Wines, LLC selects 2019 as their benchmark year. In 2019, they produced 800 tons of PNO grapes and are using a published NASS price of $570/ton to determine the value of the crop at $456,000 for the benchmark year
Full details on determining crop value is available here.
How to Apply
Eligible wineries can complete the application with the USDA here.
Tax Impact
Note that any benefits from this program are treated as taxable income to the recipient.
Please contact your tax advisor for assistance with the application or supporting calculations.