(a) Any change in a farming operation that would increase the number of persons to which the provisions of this part apply must be bona fide and substantive. If bona fide, the following will be considered to be a substantive change in the farming operation:
(1) The addition of a family member to a farming operation in accordance with § 1400.208, except that the addition will not affect the status of any other person or legal entity that is added to the farming operation; or
(2) With respect to a landowner only, a change from a cash rent to a share rent; or
(3) An increase through the acquisition of land used for agricultural production not previously involved in the farming operation of at least 20 percent or more in the total land involved in the farming operation.
(i) For the purpose of payment limitations, the increase in agricultural land will be considered an applicable bona fide and substantive change for the increase of only one person or legal entity to the farming operation, unless;
(ii) A representative of the State FSA office determines, based on the magnitude and complexity of the change represented, the increase in agricultural land supports additional persons or legal entities to the farming operation; or
(4) A change in ownership by sale or gift of equipment from a person or legal entity previously engaged in a farming operation to a person or legal entity that has not been involved in the operation. The sale or gift of equipment will be considered to be bona fide and substantive only if:
(i) The transferred amount of the equipment is commensurate with the new person's or legal entity's share of the farming operation;
(ii) The sale or gift of the equipment was based on the equipment's fair market value;
(iii) The former owner of the equipment has no direct or indirect control over the equipment;
(iv) The transaction was not financed by the former owner; and
(v) Preference was not given to the former owner to re-purchase the equipment at a later date; or
(5) A change in ownership by sale or gift of land or livestock from a person or legal entity who previously has been engaged in a farming operation to a person or legal entity that has not been involved in the operation. The sale or gift of land or livestock will be considered to be bona fide and substantive only if:
(i) The transferred amount of the land or livestock is commensurate with the new person's or legal entity's share of the farming operation;
(ii) The sale or gift of land or livestock was based on land's or livestock's fair market value;
(iii) The former owner of the land or livestock has no direct or indirect control over the land or livestock;
(iv) The transaction was not financed by the former owner; and
(v) Preference was not given to the former owner to re-purchase the land or livestock at a later date.
(b) Unless the requirements in paragraph (a) of this section are met, the increase in persons in the farming operation will not be recognized for payment limitation purposes and the additional persons or legal entities are not eligible for program payment identified in § 1400.1 otherwise resulting from the farming operation.
[73 FR 79273, Dec. 29, 2008, as amended at 75 FR 899, Jan. 7, 2010; 85 FR 52038, Aug. 24, 2020]