In what can only be described as a throwback to debates that were resolved in the early 1990s, Senator Russell Feingold (D-Wisconsin) has just introduced S. 1118, the "Irrigation Subsidy Reduction Act of 2005." The bill targets water from Reclamation project sources and would have the effect of increasing the cost of that water to most farmers receiving project water. The following has been prepared to alert you of this legislation, briefly summarize its potential effects to family farmers and ranchers who depend on federal water projects, and urge that you take immediate action to stop this bill.

According to the text of the bill, Senator Feingold believes that:

• "the justification for providing water at less than full cost was to benefit and promote the development of small family farms and exclude large corporate farms, but this purpose has been frustrated over the years due to inadequate implementation of subsidy and acreage limits;" and

• "below-cost water prices tend to encourage excessive use of scarce water supplies in the arid regions of the West, and reasonable price increases to the wealthiest western farmers would provide an economic incentive for greater water conservation."

S. 1118 Redefines who is Entitled to Receive Non-Full Cost Water From Reclamation Projects - S. 1118 resurrects the abandoned concept of "farm operation." As defined by Senator Feingold’s bill, a "farm operation" would be all land that is under the control or supervision of the same individual(s) or entity(ies). For example, it appears that multiple partnerships comprised of the same partners would constitute a single "farming operation," even if their farms are completely separate and distinct. It also appears that, even if there was only some overlap in membership, the farms of multiple unrelated entities could be combined into a single "farm operation."

S.1118 Imposes a "Means Test" That Will Increase Water Costs for Farmers - S. 1118 then provides that the amount of irrigation water from Reclamation project sources that could be delivered at less than full cost is reduced for any qualified recipient that reports gross farm income from a single "farm operation" in excess of $500,000 for a taxable year. That reduction is determined by dividing $500,000 by the landholder’s gross farm income for the relevant year, and then multiplying the result by the number of acres in the "farm operation." Although the bill is poorly drafted and creates a great many ambiguities, Senator Feingold’s intent seems to be to reduce the existing 960-acre limit for non-full cost water for any landholder with gross farm income over $500,000. Given the very low profit margins in farming, this "means test" will likely capture a great many farmers and increase their cost of water.

S. 1118 Requires That Tax Returns Must be Filed with the Bureau of Reclamation in Order to Receive Project Water - Senator Feingold’s bill goes on to require the annual filing of "certificates of compliance" for "farm operators" (presumably comparable to the current certification forms for landholders). It also requires farmers to file (i) copies of any lease or "other agreement" executed by each of the parties and (ii) a copy of each landholder’s personal income tax return for any taxable year in which the landholder (as a lessee or "farm operator") received irrigation water at less than full cost.

S. 1118 Rescinds Protections Against Government Information Being Used Against Farmers - This bill directs the Secretary of the Interior, the Secretary of Agriculture and the Secretary of the Treasury to enter into a memorandum of understanding that would allow the Bureau of Reclamation to have access to information collected or maintained by the Department of the Treasury (i.e., the Internal Revenue Service) and the Department of Agriculture that would "aid enforcement of the ownership and pricing limitations of Federal reclamation law."

In short, S. 1118 redefines who is entitled to receive non-full cost water from Reclamation project sources, imposes a means test for the receipt of that water, increases the cost of water for the vast majority of farmers receiving Reclamation project water, creates the unprecedented requirement that tax returns must be filed with Reclamation in order to receive project water, and rescinds longstanding protections against government information being used to attack farmers.

The Family Farm Alliance intends to vigorously oppose this bill by educating Members of Congress about the true facts of the Reclamation program and pointing out the numerous erroneous assumptions underlying S. 1118.

We suggest you contact your senators and representatives as soon as possible to do likewise.

We will keep you advised of our efforts on this bill and its progress in Congress.