The Package is divided into three parts, Disaster Relief and Market Loss Assistance, together totaling $5.975 billion and Tax Relief to improve the economic safety net for farmers and ranchers.

This package includes $2.575 billion in total funding to address crop disaster losses. This is divided into three parts. The Secretary is granted broad authority to create and implement a disaster program. This approach is necessary for a number of reasons. First, since the growing season is not complete, there is an inability to fully define the extent and nature of the disaster at this time. Also, as a result of the intensity of the weather-related and economic distress, this will expedite the delivery of assistance to producers. Finally, giving the Secretary maximum flexibility will cut through red tape and allow assistance in a manner most beneficial to individual producers.

I. Single Year Disaster $1.5 billion will be available to assist producers who have been hit by crop losses in 1998.

II. Multi-Year Disaster A further $875 million will be available to provide assistance to those producers who have suffered a multiple-year crop loss, especially those farmers in the Upper Midwest battling wheat scab disease and multiyear flooding.

III. Livestock Feed Assistance A $200 million program of livestock feed assistance will provide cost share assistance to livestock producers who lost their 1998 supplies of feed to disaster.

- Payments shall be available to all producers of all crops who have had crop losses

- Payments are allowed for quantity, quality (including, but not limited to alfatoxin) and severe economic losses due to damaging weather or related condition

- Secretary given authority to determine eligible crop losses, loss thresholds, eligible persons, payment limitations and payment rates

- Secretary authorized to provide incentives to those who purchased crop insurance in 1998

- Recipients of 1998 disaster assistance, who did not purchase crop insurance, are required to purchase crop insurance for next two years

Congress will also provide $3.057 billion in payments to producers eligible for Freedom to Farm contracts. The purpose of this payment is to partially compensate producers for loss of markets in 1998 due to circumstances beyond their control. These circumstances include economic dislocation, unilateral trade sanctions and a failure of the government to pursue trade opportunities aggressively.

This assistance will come in the form of a one-time payment similar to the Agriculture Market Transition (AMTA) payments under the Farm Bill. The payment represents approximately 50% of the AMTA payment received by the producer in fiscal year 1998. From the amount allocated for market loss assistance, dairy producers will receive payments totaling $200 million through a method to be determined by the Secretary.

To provide market loss assistance to soybean producers, who are not eligible for AMTA payments, the package includes biodiesel legislation. This language amends the Energy Policy Act of 1992 to provide fuel use credits to operators of vehicle fleets who use fuel containing at least 20 percent biodiesel by volume. It is estimated this will create sufficient demand to increase prices by up to 14 cents per bushel.

Health Insurance Deductibility – Expands deduction of health care insurance premiums for self-employed individuals. This provision, which increases the deduction by one-third immediately, will help producers lower costs and thus remain competitive. Currently, self-employed individuals may deduct 45% of health insurance premiums, this would move to 60% in 1999, 70% in 2002 and 100% in 2003.

Income Averaging -- Making income averaging a permanent part of the tax code gives farmers and ranchers another tool to smooth out income spikes that are a part of every farm family’s lives. Assume a farm couple with highly variable income over three years of $120,000. The couple would save $3,744 on their tax bill using the following years of income:

1^st year -- $35,000

2^nd year -- $15,000

3^rd year -- $70,000

With income averaging, a tax liability of $21,744 is reduced to $18,000.

Five-year net operating loss carryback -- Here the tool works in reverse to income averaging: farm operators may carryback a net loss in its operations to prior years -- up to five years back -- when the operation paid federal income taxes. Taxpayers may receive a tax refund using the net operating loss carryback.

Income deferment -- The bill prevents the "doctrine of constructive receipts" from being applied to AMTA payments. Under this provision, tax liability will occur only when farmers actually receive a payment. Under current law, producers may have incurred this liability when they were simply eligible to receive them. This allows producers to more effectively manage their finances.