{
  "id": "RL34457",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "RL34457",
  "active": true,
  "source": "EveryCRSReport.com",
  "versions": [
    {
      "source": "EveryCRSReport.com",
      "id": 344294,
      "date": "2008-04-14",
      "retrieved": "2016-04-06T22:36:26.023262",
      "title": "Conservation Reserve Program Payments: Self-Employment Income, Rental Income, or Something Else?",
      "summary": "Under the Conservation Reserve Program (CRP), owners and operators of eligible land may enter into a contract with the Secretary of Agriculture to enroll land in the program and convert it to less intensive use under an approved conservation plan. In return, participants receive an annual payment that the statute refers to as \u201crent.\u201d Legislation establishing and extending the program has been silent as to the appropriate tax treatment of these payments. For many years, the Internal Revenue Service (IRS) generally treated the payments as farming income when received by someone who was engaged in the trade or business of farming, but as rental income when received by others.\nThe IRS\u2019s position appears to have changed to one that would treat all Conservation Reserve Program payments as farming income and, thus, subject to self-employment tax. Recently, the IRS published a proposed revenue ruling that explains its treatment of CRP payments as income from the trade or business of farming and, thus, subject to self-employment tax.\nCurrently, case law provides some support for the IRS\u2019s position that the CRP\u2019s annual rental payments are not rent that is excludible from self-employment tax. This case law has not, however, considered CRP payments received by individuals who were not previously engaged in farming and who have purchased property and immediately enrolled it in the CRP (or agreed to continue the enrollment begun by the previous owner/operator). Neither have courts considered CRP payments to those who hire third parties to perform activities required by the CRP contract.\nThe possibility that the payments may not constitute self-employment income even if they do not qualify as excludible rent has not been considered by either the courts or the IRS. Neither has yet considered the statutory requirement that all payments must be returned if the contract is terminated.\nThe Heartland, Habitat, Harvest, and Horticulture Act of 2007 (S. 2242), introduced in the 110th Congress, contained provisions that would exclude CRP payments from self-employment income for some taxpayers and would allow all recipients to choose to receive a tax credit in lieu of the payments. These provisions were incorporated into the 2007 Farm Bill (H.R. 2419), which is in conference.\nThis report outlines the history of the program, the changing positions of the IRS, pertinent case law, and other provisions of the Internal Revenue Code (IRC). Several possible approaches to the taxation of CRP payments are discussed.",
      "type": "CRS Report",
      "typeId": "REPORTS",
      "active": true,
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      "topics": []
    }
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  "topics": []
}