To clarify certain payment limitations applicable to certain payments under title I of the Farm Security and Rural Investment Act of 2002 and section 1101 of the Agricultural Reconciliation Act of 2005 and to partially restore funding to programs reduced by section 1101, 1201, and 1202 of the Agricultural Reconciliation Act of 2005.

SA 2359. Mr. GRASSLEY (for himself, Mr. Dorgan, Mr. Enzi, Mr. Harkin,
Mr. Hagel, Mr. Johnson, Mr. Brownback, Mr. Thune, Mr. Feingold, Mr.
Conrad, Mr. Thomas, Mrs. Clinton, and Mr. Nelson of Nebraska) submitted
an amendment intended to be proposed by him to the bill S. 1932, to
provide for reconciliation pursuant to section 202(a) of the concurrent
resolution on the budget for fiscal year 2006 (H. Con. Res. 95); as
follows:

Beginning on page 10, strike line 8 and all that follows
through page 17, line 22 and insert the following:

SEC. 1101. REDUCTION OF COMMODITY PROGRAM PAYMENTS.

(a) In General.--Subtitle F of title I of the Farm Security
and Rural Investment Act of 2002 (7 U.S.C. 7991 et seq.) is
amended by adding at the end the following:

``SEC. 1619. REDUCTION OF COMMODITY PROGRAM PAYMENTS.

``(a) Definition of Commodity Program Payments.--In this
section, the term `commodity program payments' means--
``(1) direct payments;
``(2) counter-cyclical payments; and
``(3) payments and benefits associated with the loan
program, including gains from the forfeiture of any commodity
pledged as collateral for loans and gains from in-kind
payments described in section 166 of the Federal Agriculture
Improvement and Reform Act of 1996 (7 U.S.C. 7286), as
determined by the Secretary.
``(b) Reduction.--
``(1) In general.--Notwithstanding any other provision of
this title, for each of the 2007 through 2010 crop years for
wheat, corn, grain sorghum, barley, oats, upland cotton,
extra long staple cotton, rice, soybeans, other oilseeds,
wool, mohair, honey, dry peas, lentils, small chickpeas,
unshorn pelts, silage, hay, and peanuts, the Secretary shall
reduce the total amount of commodity program payments
received by the producers on a farm for those commodities for
that crop year by an amount equal to 2.5 percent of that
amount.
``(2) Milk.--During the period beginning on October 1,
2005, and ending on September 30, 2007, the Secretary shall
reduce the total amount of payments received by producers
pursuant to section 1502 by an amount equal to 2.5 percent of
that amount.''.
(b) Commodities.--
(1) In general.--Title I of the Farm Security and Rural
Investment Act of 2002 (7 U.S.C. 7901 et seq.), including
each amendment made by that title, is amended by striking
``2007'' each place it appears (other than in sections
1104(f), 1304(g), and 1307(a)(6) and amendments made by this
title) and inserting ``2011''.
(2) Cotton.--Sections 1204(e)(1) and 1208(a) of the Farm
Security and Rural Investment Act of 2002 (7 U.S.C.
7934(e)(1), 7938(a)) are amended by striking ``2008'' each
place it appears and inserting ``2012''.
(3) Payment limitations.--
(A) Definitions.--Section 1001(a) of the Food Security Act
of 1985 (Public Law 99-198; 99 Stat. 1444) is amended--
(i) by redesignating paragraphs (2) and (3) as paragraphs
(4) and (5), respectively; and
(ii) by inserting after paragraph (1) the following:
``(2) Entity.--
``(A) In general.--The term `entity' means--
``(i) an entity that (subject to the requirements of this
section and section 1001A) is eligible to receive a payment
under subsection (b), (c), or (d);
``(ii) a corporation, joint stock company, association,
limited partnership, charitable organization, grantor of a
revocable trust, or other similar entity (as determined by
the Secretary); and
``(iii) an entity that is participating in a farming
operation as a partner in a general partnership or as a
participant in a joint venture.
``(B) Exclusion.--Except with respect to section 1001F, the
term `entity' does not include an entity that is a general
partnership or joint venture.
``(3) Individual.--The term `individual' means--
``(A) a natural person, and minor children of the natural
person (as determined by the Secretary), that (subject to the
requirements of this section and section 1001A) is eligible
to receive a payment under subsection (b), (c), or (d); and
``(B) an individual participating in a farming operation as
a partner in a general partnership, a participant in a joint
venture, a grantor of a revocable trust, or a participant in
a similar entity (as determined by the Secretary).''.
(B) Limitation on direct payments.--Section 1001(b) of the
Food Security Act of 1985 (Public Law 99-198; 99 Stat. 1444)
is amended in paragraphs (1) and (2)--
(i) by striking ``made to a person'' each place it appears
and inserting ``that an individual or entity may receive,
directly or indirectly,''; and
(ii) by striking ``$40,000'' each place it appears and
inserting ``$20,000''.
(C) Limitation on counter-cyclical payments.--Section
1001(c) of the Food Security Act of 1985 (Public Law 99-198;
99 Stat. 1444) is amended in paragraphs (1) and (2)--
(i) by striking ``made to a person'' each place it appears
and inserting ``that an individual or entity may receive,
directly or indirectly,''; and
(ii) by striking ``$65,000'' each place it appears and
inserting ``$30,000''.
(D) Limitation on marketing loan gains and loan deficiency
payments.--Section 1001(d) of the Food Security Act of 1985
(Public Law 99-198; 99 Stat. 1444) is amended--
(i) in paragraph (1)--

(I) in the matter preceding subparagraph (A), by striking
``that a person may receive'' and inserting ``that an
individual or entity may receive, directly or indirectly,'';
and
(II) by adding at the end the following:

``(C) In the case of settlement of a marketing assistance
loan under that subtitle, or section 1307 of that Act, for a
crop of any loan commodity by forfeiture, any gain
represented by the amount by which the loan amount exceeds
the repayment amount for the loan if the loan had been
settled by repayment instead of forfeiture.
``(D) Any gain realized from the use of a commodity
certificate issued by the Commodity Credit Corporation, as
determined by the Secretary, including the use of a
certificate for the settlement of a marketing assistance loan
made under that subtitle or section 1307 of that Act.''; and
(ii) in paragraph (2)--

(I) in the matter preceding subparagraph (A), by striking
``that a person may receive'' and inserting ``that an
individual or entity may receive, directly or indirectly,'';
and
(II) by adding at the end the following:

``(C) In the case of settlement of a marketing assistance
loan under that subtitle, or section 1307 of that Act, for
peanuts, wool, mohair, or honey by forfeiture, any gain
represented by the amount by which the loan amount exceeds
the repayment amount for the loan if the loan had been
settled by repayment instead of forfeiture.
``(D) Any gain realized from the use of a commodity
certificate issued by the Commodity Credit Corporation, as
determined by the Secretary, including the use of a
certificate for the settlement of a marketing assistance loan
made under that subtitle or section 1307 of that Act.''.
(E) Payments to individual and entities.--Section 1001 of
the Food Security Act of 1985 (Public Law 99-198; 99 Stat.
1444) is amended--
(i) by striking subsection (e) and inserting the following:
``(e) Payments to Individuals and Entities.--
``(1) Interests within the same entity.--All individuals or
entities that are owners of an entity, including
shareholders, may not collectively receive payments directly
or indirectly that are attributable to the ownership
interests in the entity for a fiscal or corresponding crop
year that exceed the limitations established under
subsections (b), (c), and (d).
``(2) All interests of an individual or entity.--An
individual or entity may not receive, directly or indirectly,
through all ownership interests of the individual or entity
from all sources, payments for a fiscal or

[[Page S12255]]

corresponding crop year that exceed the limitations
established under subsections (b), (c), and (d).''; and
(ii) in subsection (f), by striking ``person'' and
inserting ``individual or entity''.
(4) Substantive change; payments limited to active
farmers.--Section 1001A of the Food Security Act of 1985 (7
U.S.C. 1308-1) is amended to read as follows:

``SEC. 1001A. SUBSTANTIVE CHANGE; PAYMENTS LIMITED TO ACTIVE
FARMERS.

``(a) Substantive Change.--
``(1) In general.--The Secretary may not approve (for
purposes of the application of the limitations under this
section) any change in a farming operation that otherwise
will increase the number of individuals or entities to which
the limitations under this section are applied unless the
Secretary determines that the change is bona fide and
substantive.
``(2) Family members.--For the purpose of paragraph (1),
the addition of a family member (as defined in regulations
promulgated by the Secretary) to a farming operation shall be
considered to be a bona fide and substantive change in the
farming operation.
``(3) Prohibition.--The Secretary may not establish a di
minimus beneficial interest level exempt from the
requirements of this section.
``(b) Payments Limited to Active Farmers.--
``(1) In general.--To be eligible to receive, directly or
indirectly, payments or benefits (as described in subsections
(b), (c), and (d) of section 1001 as being subject to
limitation) with respect to a particular farming operation,
an individual or entity shall be actively engaged in farming
with respect to the operation, as provided under paragraphs
(2), (3), and (4).
``(2) General classes actively engaged in farming.--
``(A) In general.--For the purpose of paragraph (1), except
as otherwise provided in paragraph (3)--
``(i) an individual shall be considered to be actively
engaged in farming with respect to a farm operation if--

``(I) the individual makes a significant contribution
(based on the total value of the farming operation) to the
farming operation of--

``(aa) capital, equipment, or land; and
``(bb) personal labor and active personal management (in
accordance with subparagraph (E));

``(II) the individual's share of the profits or losses from
the farming operation is commensurate with the individual's
contributions to the operation; and
``(III) the contributions of the individual are at risk;

``(ii) an entity (as defined in section 1001(a)) shall be
considered to be actively engaged in farming with respect to
a farming operation if--

``(I) the entity separately makes a significant
contribution (based on the total value of the farming
operation) of capital, equipment, or land;
``(II)(aa) the stockholders or members that collectively
own at least 50 percent of the combined beneficial interest
in the entity each make a significant contribution of
personal labor or active personal management to the
operation; or
``(bb) in the case of a corporation or entity in which all
of the beneficial interests are held by family members (as
defined in paragraph (3)(B)(i)), any stockholder or member
(or household comprised of a stockholder or member and the
spouse of the stockholder or member) who owns at least 10
percent of the beneficial interest makes a significant
contribution of personal labor or active personal management;
and
``(III) the standards provided in subclauses (II) and (III)
of clause (i), as applied to the entity, are met by the
entity.

``(B) Entities making significant contributions.--If a
general partnership, joint venture, or similar entity (as
determined by the Secretary) separately makes a significant
contribution (based on the total value of the farming
operation involved) of capital, equipment, or land, and the
standards provided in subclauses (II) and (III) of
subparagraph (A)(i), as applied to the entity, are met by the
entity, the partners or members making a significant
contribution of personal labor or active personal management
shall be considered to be actively engaged in farming with
respect to the farming operation involved.
``(C) Equipment and personal labor.--In making
determinations under this subsection regarding equipment and
personal labor, the Secretary shall take into consideration
the equipment and personal labor normally and customarily
provided by farm operators in the area involved to produce
program crops.
``(D) Active personal management.--For an individual to be
considered to be providing active personal management under
this paragraph on behalf of the individual or entity, the
management provided by the individual shall be personally
provided on a regular, substantial, and continuous basis
through the supervision and direction of--
``(i) activities and labor involved in the farming
operation; and
``(ii) onsite services that are directly related and
necessary to the farming operation.
``(E) Significant contribution of personal labor or active
personal management.--
``(i) In general.--For an individual to be considered to be
providing a significant contribution of personal labor or
active personal management under this paragraph on behalf of
the individual or entity, the total contribution of personal
labor and active personal management shall be at least equal
to the lesser of--

``(I) the material participation standard as determined
under Treasury Regulation section 1.469-5T(a), as in effect
on the date of enactment of this subsection; or
``(II)(aa) 50 percent of the commensurate share of the
total number of hours of personal labor and active personal
management required to conduct the farming operation; or
``(bb) in the case of a stockholder or member (or household
comprised of a stockholder or member and the spouse of the
stockholder or member) who owns at least 10 percent of the
beneficial interest in a corporation or entity in which all
of the beneficial interests are held by family members (as
defined in paragraph (3)(B)), 50 percent of the commensurate
share of hours of all family members' personal labor and
active personal management required to conduct the farming
operations.

``(ii) Minimum number of labor hours.--For the purpose of
clause (i), the minimum number of labor hours required to
produce each commodity shall be equal to the number of hours
that would be necessary to conduct a farming operation for
the production of each commodity that is comparable in size
to an individual or entity's commensurate share in the
farming operation for the production of the commodity, based
on the minimum number of hours per acre required to produce
the commodity in the State in which the farming operation is
located, as determined by the Secretary.
``(3) Special classes actively engaged in farming.--
Notwithstanding paragraph (2), the following persons shall be
considered to be actively engaged in farming with respect to
a farm operation:
``(A) Landowners.--An individual or entity that is a
landowner contributing the owned land and that meets the
standard provided in subclauses (II) and (III) of paragraph
(2)(A)(i), if--
``(i) the landowner share rents the land; and
``(ii) the share received by the landowner is commensurate
with the share of the crop or income received as rent.
``(B) Sharecroppers.--A sharecropper who makes a
significant contribution of personal labor to the farming
operation and, with respect to such contribution, who meets
the standards provided in subclauses (II) and (III) of
paragraph (2)(A)(i).
``(4) Individuals and entities not actively engaged in
farming.--For the purposes of paragraph (1), except as
provided in paragraph (3), the following individuals and
entities shall not be considered to be actively engaged in
farming with respect to a farm operation:
``(A) Landowners.--A landowner contributing land to the
farming operation if the landowner receives cash rent, or a
crop share guaranteed as to the amount of the commodity to be
paid in rent, for the use of the land.
``(B) Other individuals and entities.--Any other individual
or entity, or class of individual or entity, that fails to
meet the standards established under paragraphs (2) and (3),
as determined by the Secretary.
``(5) Personal labor and active personal management.--No
stockholder or member may provide personal labor or active
personal management to meet the requirements of this
subsection for individuals or entities collectively
receiving, directly or indirectly, more than the applicable
limits in (b), (c), and (d) of section 1001.
``(6) Custom farming services.--An individual or entity
receiving custom farming services shall be considered to be
separately eligible for payment limitation purposes if the
individual or entity is actively engaged in farming as
determined under paragraphs (1) through (3).
``(7) Growers of hybrid seed.--To determine whether an
individual or entity growing hybrid seed under contract shall
be considered to be actively engaged in farming, the
Secretary shall not take into consideration the existence of
a hybrid seed contract.
``(c) Notification by Entities.--To facilitate the
administration of this subsection, each entity receiving
payments or benefits (as described in subsections (b), (c),
and (d) of section 1001 as being subject to limitation) with
respect to a particular farming operation shall--
``(1) notify each individual or other entity that acquires
or holds a beneficial interest in the farming operation of
the requirements and limitations under this section; and
``(2) provide to the Secretary of Agriculture, at such
times and in such manner as may be prescribed by the
Secretary, the name and social security number of each
individual, or the name and taxpayer identification number of
each entity, that holds or acquires such a beneficial
interest.''.
(5) Schemes or devices.--Section 1001B of the Food Security
Act of 1985 (7 U.S.C. 1308-2) is amended--
(A) by striking ``If the Secretary of Agriculture
determines that any person'' and inserting:
``(a) In General.--If the Secretary of Agriculture
determines that any individual or entity'';
(B) in subsection (a) (as designated by paragraph (1)), by
striking ``person'' each place it appears and inserting
``individual or entity''; and

[[Page S12256]]

(C) by adding at the end the following:
``(b) Fraud.--
``(1) In general.--If the Secretary determines that an
individual or entity has committed, or has assisted another
individual or entity in committing, fraud in connection with
a scheme or device to evade, or that has the purpose of
evading, section 1001, 1001A, or 1001C, the individual or
entity shall--
``(A) be ineligible to receive farm program payments (as
described in subsections (b), (c), and (d) of section 1001 as
being subject to limitation) applicable to--
``(i) the crop year for which the scheme or device is
adopted; and
``(ii) the succeeding 5 crop years; and
``(iii) be responsible for payment to the Commodity Credit
Corporation an amount equal to the total of all payments and
loan gains improperly received by the individual or entity as
a result of the scheme or device.
``(2) Examples of prohibited activities.--Prohibited
activities under paragraph (1) may include actions that
materially affect the ability of the Secretary to make a
determination under section 1001, including--
``(A) failure to submit to the Secretary documents
requested by the Secretary:
``(B) submission to the Secretary of falsified documents;
and
``(C) failure to notify the Secretary of a change from
initial submissions of information to the Secretary by an
individual or entity, regarding active labor, active
management, capital, land, or equipment provided by the
individual or entity person to a farming operation.''.
(6) Foreign individuals and entities made ineligible for
program benefits.--Section 1001C of the Food Security Act of
1985 (7 U.S.C. 1308-3) is amended--
(A) in the section heading, by striking ``persons'' and
inserting ``individuals and entities'';
(B) in subsection (a), by striking ``person'' each place it
appears and inserting ``individual''; and
(C) in subsection (b)--
(i) by striking the subsection heading and inserting
``Entities''; and
(ii) in the first sentence, by striking ``a corporation or
other'' and inserting ``an''.

SEC. 1102. FORFEITURE PENALTY FOR NONRECOURSE SUGAR LOANS.

Section 156 of the Federal Agriculture Improvement and
Reform Act of 1996 (7 U.S.C. 7272) is amended--
(1) by redesignating subsections (h), (i), and (j) as
subsections (i), (j), and (k), respectively; and
(2) by inserting after subsection (g) the following:
``(h) Forfeiture Penalty.--
``(1) In general.--In the case of each of the 2006 through
2010 crops of sugar beets and sugarcane, a penalty shall be
assessed on the forfeiture of any sugar pledged as collateral
for a nonrecourse loan under this section.
``(2) Amount.--The penalty for sugarcane and sugar beets
under this subsection shall be 1.2 percent of the loan rate
established for sugarcane and sugar beets under subsections
(a) and (b), respectively.
``(3) Effect of forfeiture.--Any payments owed producers by
a processor that forfeits any sugar pledged as collateral for
a nonrecourse loan shall be reduced in proportion to the loan
forfeiture penalty incurred by the processor.
``(4) Crops.--This subsection shall apply only to the 2006
through 2010 crops of sugar beets and sugarcane.''.

SEC. 1103. COTTON COMPETITIVENESS PROVISIONS.

(a) In General.--Section 1207 of the Farm Security and
Rural Investment Act of 2002 (7 U.S.C. 7937) is amended--
(1) by striking the section heading and inserting the
following: ``upland cotton import quotas.'';
(2) by striking subsection (a);
(3) by redesignating subsections (b) and (c) as subsections
(a) and (b), respectively;
(4) in subsection (a) (as so redesignated)--
(A) in paragraph (1)--
(i) in subparagraph (B), by striking ``, adjusted for the
value of any certificate issued under subsection (a),''; and
(ii) in subparagraph (C), by striking ``, for the value of
any certificates issued under subsection (a)''; and
(B) in paragraph (4), by striking ``subsection (c)'' and
inserting ``subsection (b)''; and
(5) in subsection (b)(2) (as so redesignated), by striking
``subsection (b)'' and inserting ``subsection (a)''.
(b) FAIR.--Section 136 of the Federal Agriculture
Improvement and Reform Act of 1996 (7 U.S.C. 7236) is
repealed.
(c) Effective Date.--The amendments made by this section
take effect on August 1, 2006.

SEC. 1104. NATIONAL DAIRY MARKET LOSS PAYMENTS.

(a) Amount.--Section 1502(c) of the Farm Security and Rural
Investment Act of 2002 (7 U.S.C. 7982(c)) is amended by
striking paragraph (3) and inserting the following:
``(3)(A) during the period beginning on the first day of
the month the producers on a dairy farm enter into a contract
under this section and ending on September 30, 2005, 45
percent; and
``(B) during the period beginning on October 1, 2005, and
ending on September 30, 2007, 34 percent.''.
(b) Duration.--Section 1502 of the Farm Security and Rural
Investment Act of 2002 (7 U.S.C. 7982) is amended by striking
``2005'' each place it appears in subsections (f) and (g)(1)
and inserting ``2007''.
(c) Conforming Amendments.--Section 1502 of the Farm
Security and Rural Investment Act of 2002 (7 U.S.C. 7982) is
amended--
(1) in subsection (g)(1), by striking ``and subsection
(h)''; and
(2) by striking subsection (h).

SEC. 1105. ADVANCE DIRECT PAYMENTS.

(a) In General.--Section 1103(d)(2) of the Farm Security
and Rural Investment Act of 2002 (7 U.S.C. 7913(d)(2)) is
amended in the first sentence by striking ``2007 crops
years'' and inserting ``2005 crop years, up to 40 percent of
the direct payment for a covered commodity for the 2006 crop
year, and up to 29 percent of the direct payment for a
covered commodity for any of the 2007 through 2011 crop
years,''.
(b) Peanuts.--Section 1303(e)(2) of the Farm Security and
Rural Investment Act of 2002 (7 U.S.C. 7953(e)(2)) is amended
in the first sentence by striking ``2007 crops years'' and
inserting ``2005 crop years, up to 40 percent of the direct
payment for the 2006 crop year, and up to 29 percent of the
direct payment for any of the 2007 through 2011 crop
years,''.

Subtitle B--Conservation

SEC. 1201. CONSERVATION RESERVE PROGRAM.

(a) In General.--Section 1231 of the Food Security Act of
1985 (16 U.S.C. 3831) is amended--
(1) in subsection (a), by striking ``2007'' and inserting
``2011'';
(2) in subsection (d), by striking ``up'' and all that
follows through ``years'' and inserting ``in the conservation
reserve at any 1 time 38,450,000 acres during the 2006
through 2010 calendar years and 38,880,000 acres during the
2006 through 2015 calendar years''; and
(3) in subsection (h)(1)(A), by striking ``2007'' and
inserting ``2011''.
(b) Funding.--Section 1241(a) of the Food Security Act of
1985 (16 U.S.C. 3841(a)) is amended--
(1) in the matter before paragraph (1), by striking ``For''
and inserting ``Except as otherwise provided in this
subsection, for''; and
(2) in paragraph (1), by striking ``The conservation'' and
inserting ``For fiscal years 2002 through 2011, the
conservation''.
(c) Implementation.--In implementing the amendments made by
this section, the Secretary of Agriculture shall achieve the
new maximum acreage enrollment limit not later than 2 years
after the date of enactment of this Act without affecting
conservation reserve existing contracts.

SEC. 1202. CONSERVATION SECURITY PROGRAM.

(a) In General.--Section 1238A(a) of the Food Security Act
of 1985 (16 U.S.C. 3838a(a)) is amended by striking ``2007''
and inserting ``2011''.
(b) Funding.--Section 1241(a)(3) of the Food Security Act
of 1985 (16 U.S.C. 3841(a)(3)) is amended by striking ``not
more than $6,037,000,000'' and all that follows through
``2014.'' and inserting the following: ``not more than--
``(A) $2,570,000,000 for the period of fiscal years 2006
through 2010; and
``(B) $6,209,000,000 for the period of fiscal years 2006
through 2015.''.
______