There has been a significant change in the laws governing how farms may be owned and operated. The laws are complex, so the explanation will be detailed.
Agricultural real estate ownership issues are complex. Certain states impose limitations on the ownership of agricultural real estate. For example, South Dakota has adopted policies against the ownership of agricultural land by corporations or LLCs, irrespective of whether domestic or foreign, and states such as Iowa have adopted integrated statutes as to “family farms.”
Other states have adopted laws that preclude ownership of real estate, agricultural or otherwise, by business organizations that include a “foreign adversary.” At the federal level, acquisitions and transfers of interests in “agricultural land” by a “foreign person” trigger certain reporting obligations, with civil penalties for failure to do so.
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It has been common to hold and operate agricultural real estate in partnership consequent to how certain farm support programs—namely, the Price Loss Coverage and the Agricultural Risk Coverage, each created by the Agricultural Act of 2014—have determined who can receive payments.
The One Big Beautiful Bill Act changed this treatment under section 10306, which created a new category of entity, a “qualified pass-through entity,” namely: a partnership, an S corporation, a limited liability company that does not affirmatively elect to be treated as a corporation, and a joint venture or general partnership.
Payments made to a qualified pass-through entity shall not exceed, for each payment specified in subsections, the amount determined by multiplying the maximum payment amount specified in subsections by the number of persons and legal entities that comprise the ownership of the qualified pass-through entity.
This provides a look-through of the qualified pass-through entity to those persons who are themselves “actively engaged in farming,” equivalent to what had previously been reserved for partnerships and joint ventures.
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This change in the law represents a significant loosening of the effective limitations on owning and operating agricultural real estate as a limited partnership, an S corporation, or an LLC. For example, a farm may now be operated as a corporation or an LLC, yielding the benefits of limited liability.
Prior issues with respect to partition of property owned in joint tenancy or in partnership may not exist if held by a corporation, LLC, or limited partnership. Furthermore, in some circumstances, what was once a complex planning framework can evolve into a more streamlined model, lowering administrative costs and allowing farm operators and their advisers to focus less on entity-level compliance and more on core business activities.
As a result of this change in the law, there may be estate planning opportunities available for LLC- or corporate-owned farming operations that may have not previously been available. Every situation is different, and the business and tax laws at issue will need to be considered before any reorganization is undertaken.
The business structure is important.
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An LLC electing to be treated as an S corporation by filing a Form 2553 is not a qualified pass-through entity as contemplated by these rules.
They must follow specific guidelines.
Regulations as to this change in the law were issued on June 2, 2026.
