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Federal Register / Vol. 86, No. 22 / Thursday, February 4, 2021 / Rules and Regulations recover costs if the conveyance includes more than reasonable holding and transaction costs. It is consistent with industry standards and the use of a published upper limit removes the potential for arbitrary decision making and expensive challenges in cost recovery cases. Additionally, this transaction type aims to help farmers and ranchers gain access to affordable farmland, and a limit on the holding and transaction costs that may be charged to the farmer or rancher ensures that there is no circumvention of that intent.
A discussion of the federal income tax regulatory requirement that an organization described in section 501c3 of the Internal Revenue Code IRC operate for the benefit of public rather than private interests is outside the scope of both the jurisdiction of the United States Department of Agriculture and this rule. For more information about the requirements applicable to tax-exempt organizations, including those described in section 501c3 of IRC, visit the IRSs Charities and Nonprofits page at www.irs.gov/
charities-and-nonprofits.
The ACEP statute requires the sale to be at agricultural value plus any reasonable holding costs. A sale at FMV
assumes that the impact of the placement of the easement on the land will result in the highest and best use of the land being agriculture, and thus agricultural value. The alternative value, the purchase price at which the entity purchased the land, would have been at most, theoretically, FMV of the land without being encumbered by the easement. If the original purchase price of the property was less than FMV of the land encumbered with the easement, then ACEP assistance through a BPS
arrangement is not necessary for the entity to have a viable transaction that would result in the same outcome and could occur without an investment of taxpayer funds.
This requirement ensures that eligible entities do not profit from the BPS
transaction at the cost of the qualified farmer or rancher. The provision requiring the eligible entity to sell the property at the original purchase price, if lower than the appraised agricultural value, was similarly included to help farmers and ranchers gain access to affordable farmland. NRCS has clarified in the regulation that appraised agricultural value means agricultural value of the land. An eligible entity should seek tax or legal advice if a particular transaction, due to the entitys unique circumstances, could jeopardize its tax-exempt status. In those instances, the entity can move
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forward independently without ACEP
assistance, especially if the entity would make a profit from the subsequent land transfer, which would negate the need for Federal funds.
No change is made to the regulation in response to this issue.
Comment: NRCS received comment requesting that the pre-closing transfer of BPS easements should allow for advance payments in addition to reimbursements.
Response: NRCS selected the reimbursement-only approach for preclosing BPS transactions as it reduces the risk for cost-recovery by allowing NRCS and the entity to ensure the transaction meets all requirements prior to NRCS providing cost-share assistance. To ensure this risk is minimized across all BPS transactions, NRCS has clarified that payment of the Federal share will occur on a reimbursable basis for all BPS
transaction types. Even under standard non-BPS ALE transactions, an advance payment may only be issued 30 days prior to closing. Therefore, the amount of time the eligible entity could be in receipt of easement funds in advance of the easement closing under the requested approach is minimal, whereas the reimbursement-only approach for BPS transactions significantly reduces risk and increases administrative savings for both the eligible entity and the Government. The regulation has been updated to make the Federal share payment provision more consistent across the BPS transaction types.
Comment: NRCS received comment related to adjusted gross income AGI
waivers; two comments suggested adding AGI waivers for entities involved in BPS transactions who play an intermediary role as landowner.
Another comment suggested automatically waiving AGI for BPS
transactions because entities only act as pass-through organizations for the purpose of the contract.
Response: The requesting and granting of AGI waivers for landowners that the Farm Service Agency FSA has determined do not meet the AGI
limitations must ultimately be addressed prior to providing ACEP
funds. Determinations to waive AGI for landowners that do not meet the AGI
limitations, as set forth in 7 CFR part 1400, must be based on a case-by-case basis. NRCS policy addresses when NRCS makes its eligibility determinations, including AGI, based on the BPS transaction type and provides maximum flexibility with respect to the timing of conducting AGI
determinations. No change is made to the regulation in response to this issue.

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Comment: NRCS received comment regarding the length of ACEPALE
agreements for BPS transactions, including request for an extension beyond the 3-year ACEPALE
agreement length and 12-month extension for post-closing transfers to a qualified buyer or an extension to a 5year agreement length.
Response: NRCS provides a period of 3 years, plus a potential additional 12
months, to find a qualified buyer, in addition to the initial 2-year period provided to close on the easement, for a total of 6 years for an individual transaction. NRCS selected the 12month extension for several reasons, largely based on the administrative burden associated with extending transactions further.
Additionally, NRCS recognizes that post-closing BPS transactions compete for the same ACEP funds that otherwise would be available to protect land that is already owned by a private or Tribal landowner or qualified farmer or rancher. Under a post-closing BPS
transaction, until transfer to a qualified farmer or rancher takes place, the intended purposes of ACEP for which the Federal funds have been invested, are not fully realized. If the property is not ultimately transferred, then those Federal funds have been rendered unavailable for 5 to 6 years during which time they could have been used to protect another property that may have met ACEP purposes from the outset. Twelve months was chosen to ensure appropriate stewardship of Federal funds. No change is made to the regulation in response to this issue.
Comment: NRCS received comment requesting addition of an option to purchase at agricultural value OPAV
for BPS agreements to maintain maximum flexibility.
Response: Encumbered land under a BPS transaction must be sold at agricultural value to a qualified farmer or rancher. The ACEP statute at 16
U.S.C. 3865bb4Di specifically allows the inclusion of additional deed terms to keep the land subject to the ALE under the ownership of a farmer or rancher, which includes easement deeds that are part of a BPS transaction.
However, NRCS must provide oversight to ensure that the use of an OPAV term in BPS transactions does not create an incentive for strawman sales to a qualified farmer or rancher just to meet statutory BPS requirements and then have the qualified farmer or rancher sell the land immediately back to the entity at agricultural value under the OPAV
term. No change is made to the regulation in response to this issue.

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