§ 1400.203 Joint operations and qualified pass-through entities.

(a) For program year 2025 and prior years, a member of a joint operation, and for program year 2026 and subsequent years, a member of a qualified pass-through entity, will be considered to be actively engaged in farming with respect to a farming operation if the member: (1) Makes a significant contribution of: (i) Capital, equipment, or land or a combination of capital, equipment, or land and (ii) Active personal labor or active personal management, or a combination of active personal labor and active personal management, and that are: (A) Performed on a regular basis, (B) Identifiable and documentable, and (C) Separate and distinct from the contributions of any other member of the farming operation; (2) Has a share of the profits or losses from the farming operation commensurate with the member's contributions to the operation; and (3) Makes contributions to the farming operation that are at risk for a loss, with the level of risk being commensurate with the member's claimed share of the farming operation. (b)(1) For program year 2025 and prior years, for a farming operation conducted by a joint operation in which the capital, equipment, or land is contributed by the joint operation, the capital, equipment, or land: (i) To meet the requirements of paragraph (a)(1)(i) of this section, and if contributed directly by the joint operation, must not be acquired as a loan made to, guaranteed, co-signed, or secured by any person, legal entity, or other joint operation that has an interest in the farming operation; and (ii) To meet the requirements of paragraphs (a)(2) and (3) of this section, and if acquired as a result of a loan made to, guaranteed, co-signed, or secured by the persons, legal entities, or joint operations with an interest in the operation, the loan must: (A) Bear the prevailing interest rate; and (B) Have a repayment schedule considered reasonable and customary for the area. (2) For program year 2026 and subsequent years, for a farming operation conducted by a qualified pass-through entity in which the capital, equipment, or land is contributed by the qualified pass-through entity, the capital, equipment, or land: (i) To meet the requirements of paragraph (a)(1)(i) of this section, and if contributed directly by the qualified pass-through entity, must not be acquired as a loan made to, guaranteed, co-signed, or secured by any person, legal entity, or other qualified pass-through entity that has an interest in the farming operation; and (ii) To meet the requirements of paragraphs (a)(2) and (3) of this section, and if acquired as a result of a loan made to, guaranteed, co-signed, or secured by the persons, legal entities, or qualified pass-through entities with an interest in the operation, the loan must: (A) Bear the prevailing interest rate; and (B) Have a repayment schedule considered reasonable and customary for the area. (c) For program year 2025 and prior, if a joint operation separately makes a significant contribution of capital, equipment, or land, or a combination of capital, equipment, or land, and the joint operation meets the provisions of § 1400.201(b)(2) and (3), the members of the joint operation who make a significant contribution of active personal labor, active personal management, or a combination of active personal labor and active personal management to the farming operation as specified in paragraph (a)(1)(ii) of this section will be considered to be actively engaged in farming with respect to the farming operation. (d) For program year 2026 and subsequent years, if a qualified pass-through entity separately makes a significant contribution of capital, equipment, or land, or a combination of capital, equipment, or land, and the qualified pass-through entity meets the provisions of § 1400.201(b)(2) and (3), the members of the qualified pass-through entity who make a significant contribution, whether compensated or not compensated, of active personal labor, active personal management, or a combination of active personal labor and active personal management to the farming operation as specified in paragraph (a)(1)(ii) of this section will be considered to be actively engaged in farming with respect to the farming operation.