by Roger McEowen, associate professor of agricultural law, (515) 294-4076, member of KS and NE Bars and honorary member of Iowa Bar. firstname.lastname@example.orgLast summer, USDA published in the Federal Register a Notice of Determination by the Secretary that all payments under the Conservation Security Program paid to farmers could be eligible to be excluded from income. Unfortunately, that statement is very misleading. To be excluded from income, the payments must be for a capital improvement. Cost-share payments for the adoption or maintenance of management or vegetative practices are not excludible from income. Similarly, payments for "existing practice," "new practice," or "enhancement activity" are not necessarily excludible from income. Instead, those payments are likely to be reported as ordinary income except, of course, to the extent the payments are for capital improvements.
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