Farmer in the Wheat Field

Many farmers qualify for crop insurance proceeds under crop insurance policy "prevent plant" rules.

Proceeds From Prevent Plant Insurance Can Be Deferred

  • 6/19/2013

Proceeds From Prevent Plant Insurance Can Be Deferred

With the continued delays in crop plantings related to the cold and wet weather across much of the Corn Belt this June, many farmers will qualify for crop insurance proceeds under crop insurance policy “prevent plant” rules. These rules apply when a farmer is unable to plant the crop by a certain date and meets the following conditions:

  • You must have been prevented from planting by an insured cause (e.g., excess moisture).
  • The condition must be common to the area. In other words, if everyone else in the area got their crop planted and you did not, the claim will be denied. 
  • The area must be greater than the lesser of 20 acres or 20 percent of the insurable crop acres in the unit.

“As long as you meet the normal crop insurance requirements, you can defer the prevent plant proceeds,” says Paul Neiffer, an agribusiness partner at CliftonLarsonAllen.

Deferring proceeds

For most of the Corn Belt states, the final plant date for corn is May 31 (and in some cases June 5). The final date for soybeans is between June 10 and June 25. Crop insurance proceeds can be deferred to the following year if you meet the following basic qualifications:

  • You use the cash method of accounting.
  • You receive proceeds for damage to crops in the current year (if you receive the proceeds in the year following the crop damage, you cannot defer it).
  • Your business practice is to normally sell more than 50 percent of your crop in the following year.

Prevent plant insurance on the face of it might not meet this requirement since in order to have a crop, you must plant it. However, there is a provision in the tax code that indicates proceeds related to prevented plantings qualifies as crop insurance for purposes of the deferral.

How we can help

Although there is nothing particularly complicated about these calculations, farmers should be fully aware of the conditions and qualifications necessary to defer proceeds. For instance, a farmer cannot make a claim until after the final planting date. The farmer must also notify the crop insurance agent within 72 hours after determining the inability to plant the crop and in no case later than 72 hours after the final plant date. An agribusiness professional can help farmers understand their options.

Paul Neiffer, Agribusiness Partner or 509-823-2920