The Senate today released several bills related to economic stimulus and COVID relief. We will review the major components of the CONTINUING SMALL BUSINESS RECOVERY AND PAYCHECK PROTECTION PROGRAM ACT that likely impacts farmers more than the other bills. We will get to those in tomorrow's post.
Here is a recap of the items particularly related to farm operations based on the Section of the bill:
101 - Added several additional eligible expenses to what would qualify for a PPP loan:
- Covered operations expenditures (software, cloud computing, and other human resources and accounting needs);
- Property damage costs (property damage from public disturbances not covered by insurance);
- Covered supplier costs (expenditures to a supplier pursuant to a contract for goods in effect prior to February 15, 2020);
- Covered worker protection expenditure (PPE and adaptive expenses to comply with federal health and safety guidelines)
103 - Selection of covered period - you can now select any period that is between 8 weeks after you first got the loan and December 31 2020.
104 - Simplified Application. If your loan is less than $150,000, you simply sign a form indicating you spent the funds in compliance of the program and retain records for three years. Between $150,000 and $2 million you are required to complete the certification worksheets but do not need to present it to the bank but must maintain records and worksheets for three years. SBA can do spot audits for compliance.
105 - Other group insurance costs count as payroll.
106 - PPP second draw loans are allowed if:
- You meet the SBA revenue size standards, if applicable;
- employ not more than 300 employees; and
- demonstrate at least a 50% reduction in gross receipts in the first or second quarter of 2020 relative to same 2019 quarter.
Loan forgiveness will maintain the same 60% requirement for labor costs and includes the extra costs listed in Sec. 101.
Farm Credit Systems with less than $10 billion in assets are allocated extra funds to provide to eligible borrowers.
108 - Allows borrowers to apply for additional funds if this bill increases the amount they are eligible for.
109 - Farmers and Ranchers who operate as a sole proprietor and who report income and expenses on Schedule F may use gross receipts instead of net self-employment income for "their" payroll. However, gross receipts will be capped at $100,000, therefore the maximum loan amount is $20,833 (assuming you have no employees). Lenders can recalculate the loan and advance extra funds if it result in a larger loan.
There are other Sections in the bill that will probably not impact farmers. As you can see the major impact for self-employed Schedule F farmers with no employees who showed a loss on their 2019 income tax return is an automatic loan amount of $20,833 that would be available to them assuming their annual 2019 gross receipts was at least $100,000.
All-in-all this bill seems to have very favorable terms for most farm operations especially if their loan amount is less than $150,000.
However, a major disappointment is the continued lack of any allowance for deducting expenses related to loan forgiveness. As of now, those expenses remain non-deductible unless the final bill changes these terms. The likely reason for not including this provision is to offset some of the cost of the stimulus.