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On December 27, 2020, President Donald Trump signed into law the Consolidated Appropriations Act, 2021 (the Act). The Act contains many topics of interest to the farm community, this post, however, will focus on the impacts to the Paycheck Protection Program (PPP) and the federally mandated sick and family medical leave. To read more about previous versions of these, and other COVID-19 relief programs, check out this page of ALEI COVID-19 resources.
Paycheck Protection Program
Title III of the Act revived the original PPP with additional funding and created a new opportunity or round of PPP loans. Originally, there was $349 billion appropriated to the PPP, however, after it was exhausted in a matter of days, another $320 billion was added on April 24, 2020. The newly passed legislation extends and continues the origination authority for the existing PPP from August 8, 2020 until March 31, 2021, with slightly modified rules for loan applications and loan forgiveness.
The types of forgivable expenses permitted under the PPP (i.e., payroll costs, mortgage, rent, and utility payments), have been expanded to include covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures, including personal protective equipment to comply with COVID-19 federal health and safety guidelines, incurred during the covered period. For more information, check out the newly issued interim final rule from the Small Business Administration (SBA).
The new loan opportunity is referred to as the Second Draw PPP. The Second Draw PPP is for smaller eligible entities that: (a) previously received a PPP loan, and (b) have used 100% of the proceeds of the PPP loan before the Second Draw loan proceeds are disbursed. Only one Second Draw PPP loan may be obtained by an eligible borrower.
To be eligible for a Second Draw PPP loan, a business must have been eligible for the first round of the PPP or be an independent contractor, self-employed individual, sole proprietor, nonprofit organization, veteran’s organization, Tribal business concern, housing cooperative, small agricultural cooperative, eligible 501(c)(6) organization or eligible nonprofit news organization that:
Has 300 or fewer employees (there is an exception to this limit for accommodation and food service businesses);
Has used or will use the full amount of its original PPP loan, if applicable; and
Demonstrates at least a 25% reduction in gross receipts calculated based upon first, second or third quarters of 2020 as compared to 2019.
The Second Draw PPP permits most eligible borrowers to receive a loan amount of the lesser of up to 2.5 times its average monthly payroll or $2,000,000. Farmers who were in business as of February 15, 2020, and operate as sole proprietors, independent contractors, or self-employed individuals, and who report income and expenses on a Schedule F tax form, however, should calculate their maximum loan amount similarly to how it would have been calculated for the original PPP (see page 37) with a few slight modifications (see page 14). To read about the details of the Second Draw PPP, check out this newly issued interim final rule.
Another modification to the PPP that is of interest to the agricultural community, is the allowance of Farm Credit System Institutions to make loans under the PPP and the new Second Draw program. The Act also specifies that business expenses paid with forgiven PPP loans are tax-deductible. Check out this article for an analysis of the amendments to the PPP, more information on the Second Draw PPP, and the new covered expenses.
COVID-19 Sick and Family Leave
The Families First Coronavirus Response Act (FFCRA), which became law in April 2020, mandated that employers with fewer than 500 employees, and certain governmental employers, provide emergency paid sick leave and paid expanded family and medical leave for COVID-19 related reasons to eligible employees. The FFCRA expired on December 31, 2020. Although the paid sick leave and family medical leave is no longer mandated, employers may, on a voluntary basis, continue to provide such leave through March 31, 2021, in exchange for a payroll tax credit. If an employer chooses to voluntarily provide sick and/or family medical leave and seek the tax credit, the employer must keep accurate records and comply with the limitations of the leave (80 hours of emergency sick leave and up to 12 weeks of family and medical leave). See this article for more information about the FFCRA.
Tax Provisions
For more information about the tax implications of the Act, check out this detailed article.