By Jonathan Coppess
This series reaches its conclusion with the most problematic change to farm policy in the Reconciliation Farm Bill. That unfortunate distinction belongs to the expanded payment limit loophole for qualified pass-through entities. The sole intent of this seemingly minor and technical revision is to allow some farm operations to maximize federal subsidy payments. It has earned the top spot because it will work to the detriment of other farmers, and of rural communities, with consequences that will reverberate far beyond them.
Background
Section 10306 (“Equitable Treatment of Certain Entities”) of the Reconciliation Farm Bill (P.L. 119-21) takes a concerning and problematic loophole for farm policy and expands it. In that provision, Congress amended the payment limit provisions initially enacted in the Food Security Act of 1985, which amended the Agricultural Adjustment Act of 1938 (7 U.S.C. §1308). The revision expands an existing exception, or loophole, that had applied to joint ventures and general partnerships (farmdoc daily, July 17, 2025). Such operations were allowed to receive payments up to “the amount determined by multiplying the maximum payment amount,” or payment limit (now $155,000), by the number of persons or legal entities that comprise the ownership, attributed through four layers of legal entities (7 U.S.C. §1308(e)(B)(ii)). The Reconciliation Farm Bill opens the loophole for all “qualified pass-through entities”: partnerships, S corporations, limited liability companies (LLC), and joint ventures or general partnerships.
Discussion
This discussion opens in the realm of the legal fictional entity. Corporations and Limited Liability Companies (LLC) are legal fictional entities, creatures of state business laws. The primary point of a legal fictional entity is to shield the owners of the entity—shareholders or members—from personal liability for the debts, obligations, or tortious actions of the entity (Prince and Fershée, 2023; Ayotte and Hansmann, 2012; Hamilton, 1970; Hall, 1964). As a basic matter, liability is legal responsibility for acts or omissions (Legal Information Institute, “liability”). This allows, for example, investment in the entity without legal responsibility by the individual beyond the investment, permitting the entity to raise capital and generate profits or returns for shareholders or owners. By comparison, in general partnerships all partners have personal liability for the acts and omissions of the partnership if committed in the scope of the partnership’s business, including joint and several liability in which each partner can be independently liable for the entire amount of any injuries (Richardson and Geyer, 1999; Legal Information Institute, “joint and several liability”).
Source : illinois.edu