This subpart specifies the terms and conditions for the Milk Loss Program. The Milk Loss Program will provide payments to eligible dairy operations for milk that was dumped or removed without compensation from the commercial milk market due to the results of droughts, wildfires, hurricanes, floods, derechos, excessive heat, winter storms, freeze (including polar vortex), and smoke exposure that occurred in the 2020, 2021, and 2022 calendar year. The Milk Loss Program will also provide payments to eligible dairy operations for milk that was dumped or removed without compensation from the commercial milk market due to the results of tornadoes that occurred in the 2022 calendar year.

This milk loss payment program will be carried out by FSA under the direction and supervision of the Deputy Administrator. In the field, the program will be administered by the State and county committees.

The following definitions apply to the Milk Loss Program.

Affected farmer means an individual person or legal entity who produces milk which is removed from the commercial market any time or who produces but was unable to deliver milk to a commercial market as a result of a qualifying event, which is limited to either a:

(1) Weather-related event preventing transportation of the milk; or

(2) Weather-related event causing a power outage or structural damage causing milk to be unmerchantable.

Application period means any period during calendar year 2020, 2021, and 2022 which an affected farmer's milk is dumped or removed without compensation from the commercial market due to a qualifying disaster event for which application for payment is made.

Average adjusted gross farm income means the average of the person or legal entity's adjusted gross income derived from farming, ranching, and forestry operations for the 3 taxable years preceding the most immediately preceding complete taxable year.

(1) If the resulting average adjusted gross farm income derived from items 1 through 12 of the definition of “income derived from farming, ranching, and forestry operations” is at least 66.66 percent of the average adjusted gross income of the person or legal entity, then the average adjusted gross farm income may also take into consideration income or benefits derived from the following:

(i) The sale of equipment to conduct farm, ranch, or forestry operations; and

(ii) The provision of production inputs and services to farmers, ranchers, foresters, and farm operations.

(2) The relevant tax years are:

(i) For the 2020 program year, 2016, 2017, and 2018; and

(ii) For the 2021 program year, 2017, 2018, and 2019; and

(iii) For the 2022 program year, 2018, 2019, and 2020.

Average adjusted gross income means the average of the adjusted gross income as defined under 26 U.S.C. 62 or comparable measure of the person or legal entity. The relevant tax years are:

(1) For the 2020 program year, 2016, 2017, and 2018;

(2) For the 2021 program year, 2017, 2018, and 2019; and

(3) For the 2022 program year, 2018, 2019, and 2020.

Base period means the first full calendar month prior to the claim period in which no qualifying disaster event occurred. If the claim period is multiple consecutive months, the base period remains the same calendar month preceding the start of the claim period.

Beginning farmer or rancher means a farmer or rancher who has not operated a farm or ranch for more than 10 years and who materially and substantially participates in the operation. For a legal entity to be considered a beginning farmer or rancher, at least 50 percent of the interest must be beginning farmers or ranchers.

Claim period means the calendar month, or months, in which milk was dumped or removed and usually is the calendar month immediately following the base period.

Commercial market means the market to which the affected farmer normally delivers milk and from which it was removed.

County committee means the FSA county committee.

Deputy Administrator means the Deputy Administrator for Farm Programs, FSA.

FSA means the Farm Service Agency, U.S. Department of Agriculture.

Income derived from farming, ranching, and forestry operations means income of an individual or entity derived from:

(1) Production of crops, specialty crops, and unfinished raw forestry products;

(2) Production of livestock, aquaculture products used for food, honeybees, and products derived from livestock;

(3) Production of farm-based renewable energy;

(4) Selling (including the sale of easements and development rights) of farm, ranch, and forestry land, water or hunting rights, or environmental benefits;

(5) Rental or lease of land or equipment used for farming, ranching, or forestry operations, including water or hunting rights;

(6) Processing, packing, storing, and transportation of farm, ranch, forestry commodities including renewable energy;

(7) Feeding, rearing, or finishing of livestock;

(8) Payments of benefits, including benefits from risk management practices, crop insurance indemnities, and catastrophic risk protection plans;

(9) Sale of land that has been used for agricultural purposes;

(10) Payments and benefits authorized under any program made available and applicable to payment eligibility and payment limitation rules;

(11) Income reported on Internal Revenue Service (IRS) Schedule F or other schedule used by the person or legal entity to report income from such operations to the IRS;

(12) Wages or dividends received from a closely held corporation, and IC-DISC or legal entity comprised entirely of family members when more than 50 percent of the legal entity's gross receipts for each tax year are derived from farming, ranching, or forestry activities as defined in this subpart; and

(13) Any other activity related to farming, ranching, and forestry, as determined by the Deputy Administrator for Farm Programs.

Limited resource farmer or rancher means a farmer or rancher:

(1) Who is a person whose:

(i) Direct or indirect gross farm sales did not exceed:

(A) $180,300 in each calendar year for 2017 and 2018 (the relevant years for the 2020 program year); or

(B) $179,000 in each of the 2018 and 2019 calendar years for the 2021 program year;

(C) $189,200 in each of the 2019 and 2020 calendar years for the 2022 program year; and,

(ii) Total household income was at or below the national poverty level for a family of four in each of the same two previous years referenced in paragraph (1)(i) of this definition; 1 or

(2) That is an entity and all members who hold an ownership interest in the entity meet the criteria in paragraph (1) of this definition.

Milk marketing organization means the marketing agency to or through which the affected dairy farmer marketed milk at the time the milk was either dumped or unable to be delivered to the commercial market due to a qualifying weather related event.

Ownership interest means to have either a legal ownership interest or a beneficial ownership interest in a legal entity. For the purposes of administering this subpart, a person or legal entity that owns a share or stock in a legal entity that is a corporation, limited liability company, limited partnership, or similar type entity where members hold a legal ownership interest and shares in the profits or losses of such entity is considered to have an ownership interest in such legal entity. A person or legal entity that is a beneficiary of a trust or heir of an estate who benefits from the profits or losses of such entity is considered to have a beneficial ownership interest in such legal entity.

Pay period means:

(1) In the case of an affected farmer who markets milk through a milk marketing organization, the period used by the milk marketing organization in settling with the affected farmer for milk, usually biweekly or monthly; or

(2) In the case of an affected farmer whose commercial market consists of direct retail sales to consumers, a calendar month.

Payment subject to refund means a payment which is made by a milk marketing organization to an affected farmer, and which such farmer is obligated to refund to the milk marketing organization.

Person means an individual, partnership, association, corporation, trust, estate, or other legal entity.

Qualifying disaster event means droughts, wildfires, hurricanes, floods, derechos, excessive heat, winter storms, freeze (including a polar vortex), and smoke exposure, occurring in the 2020, 2021, and 2022 calendar years. Qualifying disaster event also includes tornadoes occurring in the 2022 calendar year. Losses due to drought are only eligible if any area within the county in which the loss occurs was rated by the U.S. Drought Monitor as having a D2 (Severe Drought) for eight consecutive weeks or a D3 (Extreme Drought) or higher level of drought intensity during the applicable calendar years.

Removed from the commercial market means:

(1) Produced and destroyed or fed to livestock;

(2) Produced and delivered to a milk marketing organization who destroyed it or disposed of it as salvage; or

(3) Produced and otherwise diverted to other than the commercial market.

Same loss means the event or trigger that caused the milk to be removed from the commercial market.

Secretary means the Secretary of Agriculture of the United States or any officer or employee of the U.S. Department of Agriculture to whom the Secretary delegates authority to act as the Secretary.

Socially disadvantaged farmer or rancher means a farmer or rancher who is a member of a group whose members have been subjected to racial, ethnic, or gender prejudice because of their identity as members of a group without regard to their individual qualities. For entities, at least 50 percent of the ownership interest must be held by individuals who are members of such a group. Socially disadvantaged groups include the following and no others unless approved in writing by the FSA Deputy Administrator for Farm Programs (Deputy Administrator):

(1) American Indians or Alaskan Natives;

(2) Asians or Asian-Americans;

(3) Blacks or African Americans;

(4) Hispanics or Hispanic Americans;

(5) Native Hawaiians or other Pacific Islanders; and

(6) Women.

State committee means the FSA State committee.

Underserved farmer or rancher means a beginning farmer or rancher, limited resource farmer or rancher, socially disadvantaged farmer or rancher, or veteran farmer or rancher.

Veteran farmer or rancher means a farmer or rancher:

(1) Who has served in the Armed Forces (as defined in 38 U.S.C. 101(10) 2 ) and:

(i) Has not operated a farm or ranch for more than 10 years; or

(ii) Has obtained status as a veteran (as defined in 38 U.S.C. 101(2) 3 ) during the most recent 10-year period; or

(2) That is an entity, and at least 50 percent of the ownership interest is held by members who meet the criteria in paragraph (1) of this definition.

(a) To be eligible, an affected farmer, the farmer must be a:

(1) Citizen of the United States;

(2) Resident alien, which for purposes of this subpart means “lawful alien” as defined in 7 CFR 1400.3;

(3) Partnership organized under state law consisting solely of citizens of the United States or resident aliens;

(4) Corporation, limited liability company, or other organizational structure organized under State law consisting solely of citizens of the United States or resident aliens; or

(5) Indian Tribe or Tribal organization, as defined in section 4(b) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 5304).

(b) In addition to the requirements in paragraph (a) of this section, to be eligible, an affected farmer must comply with all provisions of this subpart and, as applicable:

(1) 7 CFR part 12—Highly Erodible Land and Wetland Conservation;

(2) 7 CFR part 707—Payments Due Persons Who Have Died, Disappeared, or Have Been Declared Incompetent;

(3) 7 CFR part 718—Provisions Applicable to Multiple Programs; and

(4) 7 CFR part 1403—Debt Settlement Policies and Procedures.

(a) A milk loss payment will be made to an affected farmer who is determined by the FSA county committee to be in compliance with all the terms and conditions of this subpart in the amount equal to 90 percent for affected farmers who meet the definition of underserved farmer or rancher or 75 percent for all other affected farmers of the fair market value of the farmer's normal marketings for the application period, less:

(1) Any amount the affected farmer received for milk marketed during the application period; and

(2) Any payment not subject to refund that the affected farmer received from a milk handler with respect to milk removed from the commercial market during the application period.

(b) [Reserved]

(a) The FSA county committee will determine the affected farmer's normal marketings of milk which, for the purposes of this subpart, will be the sum of the quantities of milk for which the farmer would have sold in the commercial market in each of the pay periods in the application period be it not for the removal of the affected farmer's milk from the commercial market as a result of a qualifying disaster event.

(b) Normal marketings for each pay period are based on the average daily production during the base period.

(c) Normal marketings determined in paragraph (b) of this section are adjusted for any change in the daily average number of cows milked during each pay period the milk is off the market compared with the average number of cows milked daily during the base period.

(d) If only a portion of a pay period falls within the application period, normal marketings for such pay period will be reduced so that they represent only that part of such pay period which is within the application period.

(e) The days eligible for indemnification begin on the date milk was removed or dumped and continue for the concurrent days milk was removed or dumped. Once the dairy operation returns to the normal marketing of milk, the dairy operation is no longer eligible for assistance for milk removed or dumped due to that qualifying disaster event unless after restarting commercial marketing of milk, additional milk is removed or dumped due to the same qualifying disaster event.

(a) The FSA county committee will determine the fair market value of the affected farmer's dumped milk, which, for the purposes of this subpart, will be the sum of the net proceeds such farmer would have received for normal marketings in each of the pay periods in the application period but for the qualifying disaster event.

(b) The base period per cow average daily milk production is determined by dividing the full month of milk marketings by the average number of cows in milk production for that month and the number of days in that month. To determine the milk loss payment, the base period per cow average daily milk production is multiplied by the number of milking cows in production for the claim period and by the number of days milk was removed or dumped in the claim period with the result divided by 100 to determine the applicable hundredweight and then multiplied by the hundredweight pay price.

(c) To determine the hundredweight pay price for milk, the FSA county committee will deduct from the gross pay price from the claim period milk marketing statement the per hundredweight hauling rate for the applicable month and the per hundredweight $0.15 promotion fee which it determines are normally incurred by the affected farmer but which were not incurred because of the removal of the farmer's milk from the commercial market.

(a) The affected farmer must furnish to the FSA county committee complete and accurate information sufficient to enable the FSA county committee or the Deputy Administrator to make the determinations required in this subpart. Such information must include, but is not limited to:

(1) A copy of the notice from, or other evidence of action by, the public agency which resulted in the dumping or removal of the affected farmer's milk from the commercial market.

(2) The specific weather or disaster event and its results on milk marketing for the claim period.

(3) The quantity and butterfat test of milk produced and marketed during the base period. This information must be a certified statement from the affected farmer's milk marketing organization or any other evidence the FSA county committee accepts as an accurate record of milk production and butterfat tests during the base period.

(4) The average number of dry cows, bred heifers, and cows milked during the base period and during each pay period in the application.

(5) The affected farmer will provide two milk marketing statements, one for the base period and one for the claim period.

(6) On the milk marketing statement the per hundredweight hauling rate and the per hundredweight $0.15 promotion fee, which are normally incurred by affected farmers who market through the milk marketing organization, that the affected farmer did not incur because of the dumping or removal of the milk from the commercial market, then the average price stated by the milk marketing organization will be the average gross price paid less these costs. If the milk marketing organization does not have this information, the affected farmer will furnish a statement specifying these costs, if any.

(7) The amount of proceeds, if any, received by the affected farmer from the marketing of milk produced during the application period.

(8) The amount of any payments not subject to refund made to the affected farmer by the milk marketing organization with respect to the milk produced during the application period and removed from the commercial market.

(9) A detailed written statement from the affected farmer regarding the circumstances of the milk removal or dumping, the type and geographic scope of the weather event, what transportation limitations occurred in addition to how and where the removed or dumped milk was discarded.

(b) If requested by FSA, the affected farmer must provide additional documentation that establishes the affected farmer's eligibility for a Milk Loss Program payment.

The affected farmer or the affected farmer's legal representative must sign and file an application for payment on a form which is approved for that purpose by the Deputy Administrator. The form must be filed with the county FSA office for the county where the farm headquarters are located no later than close of business of the designated deadline announced by the Secretary for 2020, 2021, and 2022 losses.

(a) Per calendar year, a person or legal entity, other than a joint venture or general partnership, is eligible to receive, directly or indirectly payments of not more than $125,000 according to the provisions in § 760.1507(b)(1); or not more than $250,000 according to the provisions in § 760.1507(b)(2) if at least 75 percent of the person's or legal entity's average adjusted gross income is average adjusted gross farm income and the applicant provides the required certification(s) and documentation. Payments made to a joint venture or general partnership cannot exceed an amount determined by multiplying the maximum payment limitation by the number of persons and legal entities that comprise the first-level ownership of the joint venture or general partnership.

(b) To certify the average adjusted gross farm income, a person or legal entity, including all members with an ownership interest in a legal entity, general partnership, or joint venture, must provide the following:

(1) A certification in the manner prescribed by FSA from the person or legal entity that the average adjusted gross farm income of the person or legal entity is at least 75 percent of the average adjusted gross income; and

(2) A certification in the manner prescribed by FSA from a licensed certified public accountant or attorney that the average adjusted gross farm income of the person or legal entity is at least 75 percent of the average adjusted gross income.

(c) A new legal entity will have its adjusted gross farm income averaged only for those years for which it was in business; however, a new legal entity will not be considered “new” to the extent it takes over an existing operation and has any elements of common ownership interest and land with the preceding person or legal entity, or with persons or legal entities with an interest in the “old” legal entity. When there is such commonality, income of the previous person or legal entity will be averaged with that of the “new” legal entity for the base period.

(d) For a person filing a joint federal tax return, the certification of average adjusted gross farm income will be reported as if the person had filed a separate federal tax return and the calculation is consistent with the information supporting the filed joint return.

(e) All persons and legal entities are subject to an audit by FSA of any information submitted for the purpose of increasing the program's payment limitation. As a part of this audit, income tax returns may be requested, and if requested, must be supplied by all related persons and legal entities. In addition to any other requirement under any Federal statute, relevant Federal income tax returns and documentation must be retained a minimum of 2 years after the end of the calendar year corresponding to the year for which payments or benefits are requested. Failure to provide necessary and accurate information to verify compliance will result in ineligibility for Milk Loss Program benefits.

(f) The direct attribution provisions in § 760.1507 apply for both payment limitation as well as in determining average adjusted gross farm income as defined and used in this subpart.

(a) A completed FSA-376, Milk Loss Program Application, must be submitted at the time of application along with the information listed in § 760.1707 to the affected farmer's recording county office by the close of business on the Milk Loss Program application deadline. Applications may be submitted in person or by mail, email, facsimile, or other methods announced by FSA. The Deputy Administrator has the discretion and authority to waive or modify deadlines and other requirements or program provisions in cases where the Deputy Administrator determines it is equitable to do so and where the Deputy Administrator finds that the lateness or failure to meet such other requirements or program provisions do not adversely affect Milk Loss Program operation.

(b) Failure of an individual, entity, or a member of an entity to submit the following payment limitation and payment eligibility forms within 60 days from the date of the Milk Loss Program application deadline, may result in no payment or a reduced payment:

(1) Form AD-2047, Customer Data Worksheet, for new customers or existing customers who need to update their customer profile;

(2) Form CCC-860, Socially Disadvantaged, Limited Resource, Beginning and Veteran Farmer or Rancher Certification, if applicable for the program year or years for which the affected farmer is applying for the Milk Loss Program and if the affected farmer chooses to provide that certification;

(3) Form CCC-901, Member Information for Legal Entities, if applicable;

(4) Form CCC-902, Farm Operating Plan for an individual or legal entity as provided in 7 CFR part 1400;

(5) Form FSA-510, Request for an Exception to the $125,000 Payment Limitation for Certain Programs, accompanied by a certification from a certified public accountant or attorney as to that person or legal entity's certification, for a legal entity and all members of that entity, for each applicable program year, including the legal entity's members, partners, or shareholders, as provided in 7 CFR part 1400; and

(6) Form AD-1026, Highly Erodible Land Conservation (HELC) and Wetland Conservation (WC) Certification, for the Milk Loss Program and applicable affiliates as provided in 7 CFR part 12.

(c) If supporting documentation is requested under § 760.1707(b), the documentation must be submitted to FSA within 60 calendar days from the request or the application will be disapproved by FSA.

(d) Milk Loss Program payments are limited to 30 days per year for each of 2020, 2021, and 2022.

(e) Each Milk Loss Program application is limited to the milk loss for one calendar month due to a qualifying disaster event or multiple qualifying disaster events. Milk loss that occurs in a subsequent month for the same qualifying disaster event will require a separate application.

(a) FSA county executive directors and State and county committees do not have authority to modify or waive any of the provisions of the regulations in this subpart.

(b) The FSA State committee may take any action authorized or required by the regulations in this subpart to be taken by the FSA county committee when such action has not been taken by the FSA county committee. The FSA State committee may also:

(1) Correct, or require a county committee to correct, any action taken by such county committee which is not in accordance with the regulations in this subpart; or

(2) Require a county committee to withhold taking any action which is not in accordance with the regulations in this subpart.

(c) No delegation herein to a State or county committee will preclude the Deputy Administrator or designee from determining any question arising under the regulations in this subpart or from reversing or modifying any determination made by a State or county committee.

(a) A receiver of an insolvent debtor's estate and the trustee of a trust estate will, for the purpose of this subpart, be considered to represent an insolvent affected farmer and the beneficiaries of a trust, respectively, and the production of the receiver or trustee will be considered to be the production of the represented person. Program documents executed by any such person will be accepted only if they are legally valid and such person has the authority to sign the applicable documents.

(b) An affected dairy farmer who is a minor will be eligible for milk loss payments only if at least one of the following requirements is true:

(1) The right of majority has been conferred on him by court proceedings or by law;

(2) A guardian has been appointed to manage the property and the applicable program documents are signed by the guardian; or

(3) A bond is furnished under which the surety guarantees any loss incurred for which the minor would be liable had the person been an adult.

(a) If the affected farmer is indebted to any agency of the United States and such indebtedness is listed on the county debt record, milk loss payments due the affected farmer the regulations in this part will be applied, as provided in the Secretary's setoff regulations, 7 CFR part 13, to such indebtedness.

(b) Compliance with the provisions of this section will not deprive the affected farmer of any right that would otherwise be available have to contest the justness of the indebtedness involved in the setoff action, either by administrative appeal or by legal action.

If the milk loss payment disbursed to an affected farmer exceeds the amount authorized under the regulations in this subpart, the affected farmer will be personally liable for repayment of the amount of such excess.

In the case of the death, incompetency, or disappearance of any affected farmer who would otherwise receive a milk loss payment, such payment may be made to the person or persons specified in the regulations contained in part 707 of this chapter. The person requesting such payment must file Form FSA-325, “Application for Payment of Amounts Due Persons Who Have Died, Disappeared, or Have Been Declared Incompetent,” as provided in that part.

(a) The affected farmer, milk marketing organization, and any other person who furnished information to such farmer or to the FSA county committee for the purpose of enabling such farmer to receive a milk loss payment under this subpart, must maintain any existing books, records, and accounts supporting any information so furnished for 3 years following the end of the year during which the application for payment was filed.

(b) The affected farmer, milk marketing organization, and any other person who furnishes such information to the affected farmer or to the FSA county committee must permit authorized representatives of the Department of Agriculture and the General Accounting Office, during regular business hours, to inspect, examine, and make copies of such books, records, and accounts.

No assignment will be made of any milk loss payment due or to come due under the regulations in this subpart. Any assignment or attempted assignment of any indemnity payment due or to come due under this subpart will be null and void.

Affected farmers may obtain information necessary to make application for a milk loss payment from the county FSA office.

Milk loss program payments will be made on a first-come, first-served basis. Applications received after all funds are used will not be paid.

(a) Payments made under this subpart to a participant for loss of milk as a result of a qualifying disaster event are calculated as follows:

(1) Amount of the fair market value of the farmer's normal marketings for the application period; less

(2) Any amount the farmer received for milk marketed during the applications period; and

(3) Any payment not subject to refund which the farmer received from a milk marketing organization with respect to milk removed from the commercial market during the application period;

(4) Multiplied by a program factor of 90 percent for underserved farmers or ranchers, or 75 percent for all other farmers or ranchers.

(b) [Reserved]