On Saturday, July 4, 2020, the President signed into law: S. 4116, which
(1) reauthorizes lending under the Paycheck Protection Program (PPP) through August 8, 2020; and
(2) separates the authorized limits for commitments under the PPP from other Small Business Administration loan programs.
Updated on June 15, 2020
On June 5, President Trumped signed into law the Paycheck Protection Program Flexibility Act of 2020 (H.R. 7010). The bipartisan legislation is narrowly focused and provides numerous technical updates to the Small Business Administration’s (SBA) Paycheck Protection Program (PPP).
The Farm Bureau supported bill is narrowly focused and includes corrections that Farm Bureau requested for the Paycheck Protection Program (PPP):
- Extends the PPP loan forgiveness period to include costs incurred over 24 weeks after a loan is issued or through Dec. 31, whichever comes first. Businesses that received a loan before the measure is enacted could keep the current eight-week period.
- Establishes a minimum loan maturity period of five years following an application for loan forgiveness, instead of the current two-year deadline set by the SBA. That provision would apply to PPP loans issued after the measure is enacted, though borrowers and lenders could agree to extend current loans.
In addition to these Farm Bureau supported provisions, H.R. 7010 also:
- Extends the period in which loans can be forgiven if businesses restore staffing or salary levels that were previously reduced from June 30 to Dec. 31. The provision would apply to the worker and wage reductions made from Feb. 15 through 30 days after the enactment of the CARES Act, which was signed into law on March 27.
- Maintains forgiveness amounts for companies that document their inability to rehire workers employed as of Feb. 15, and their inability to find similarly qualified workers by the end of the year. Under the modified measure, companies would be covered separately if they show that they couldn’t resume business levels from before Feb. 15 because they were following federal requirements for sanitization or social distancing.
- Extends the deadline to apply for a PPP loan to Dec. 31 from June 30.
- Reduces the minimum amount of loan forgiveness that comes from payroll costs from 75 percent to 60 percent.
- Repeals a provision from the CARES Act that barred companies with forgiven PPP loans from deferring their payroll tax payments.
- Allows borrowers to defer principal and interest payments on PPP loans until the SBA compensates lenders for any forgiven amounts, instead of the current six-month deferral period. Borrowers that don’t apply for forgiveness would be given at least 10 months after the program expires to start making payments.
With passage of the Paycheck Protection Program and Health Care Enhancement Act of 2020 (PPPHCE Act), farmers are now eligible for both of the major Small Business Administration (SBA) programs designed for the COVID-19 response, which are the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL) program. This means farmers can apply for low-interest loans through the EIDL program including qualifying for an advance $10,000 emergency grant. EIDL is for entities suffering economic harm due to COVID-19. Only the SBA can process EIDL applications. However, you will need to work with a SBA approved lender to apply for the PPP.
Funding for both programs are expected to be allocated quickly. If you want to apply to either of these programs, it is vital to begin applying as quickly as possible.
Farmers can join other small business owners and can apply for an EIDL advance of up to $10,000. This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available following a successful application. This loan advance will not have to be repaid. Only the SBA can process EIDL applications. The SBA announced on May 4, 2020 that agriculture enterprises with 500 or fewer employees can begin applying for Economic Injury Disaster Loan (EIDL) loans and EIDL loan advance. Use this link to apply for the EIDL. Farmers should continue consulting with their accountant, tax preparer and/or financial advisor about the PPP and EIDL application for their particular situation. Remember these programs will be available on a first-come-first serve basis and will go quickly.
Prior to passage of the PPPHCE Act, most farmers were not eligible for the EIDL. Farm Bureau led the effort to advocate to Congress that farmers should be eligible for the EIDL. Here is the letter Farm Bureau and other organizations sent to SBA regarding EIDL and was the framework for advocating to Congress.
Farmers, self-employed individuals, and independent contractors are eligible for PPP. If you have been negatively impacted financially by the COVID-19 pandemic, we encourage you to review this option. PPP includes a “forgivable” loan if the dollars are used as intended. Farm Credit and many local banks are participating and may be able to help you. However, if you are unable to apply through a local bank or Farm Credit, Farm Bureau Bank is taking applications even if you are not a prior customer.
Farm Bureau Bank also has the capacity and expertise to help if you are unable to find a local lending source. Farm Bureau Bank is continuing to process PPP applications in order to quickly submit the information to the SBA as soon as the system is reopened for application submission, perhaps as soon as today (Friday, April 24, 2020). The demand is enormous, and we expect this round of funding to run out in a matter of days. We encourage members to act now and apply if they want access to the program.
Under the previous PPP payments, many members were challenged with accessing these funds due to huge backlogs at large national banks. Some Farm Credit banks and small community banks had difficulty obtaining SBA approval to process the loans. In addition, the slow release of guidance for the self-employed and independent contractors created problems in the first round. As a result, farmer participation in the first round of PPP was weak. Of the 20 subsectors reported by SBA, the agriculture, forestry, fishing and hunting sector had the lowest average loan approval.
Again, we don’t expect the dollars to last long. So, act quickly and apply if you want access either program.
The Treasury Department released new guidance for calculating the maximum PPP loan, which includes guidance for farmers who file an IRS Schedule F. The updated guidance can be viewed here.
Question: I am a self-employed individual who reports my income on IRS Form 1040 Schedule F. What documentation must I provide in place of Schedule C and how should my maximum loan amount be determined (up to $10 million)?
Answer: Self-employed farmers (i.e., those who report their net farm profit on IRS Form 1040 Schedule 1 and Schedule F) should use IRS Form 1040 Schedule F in lieu of Schedule C, and Schedule F line 34 net farm profit should be used to determine their loan amount in place of Schedule C line 31 net profit. The calculation is otherwise the same as for Schedule C filers above. The 2019 IRS Form 1040 Schedule 1 and Schedule F must be included with the loan application.
The SBA also released new FAQs, which include how businesses could interpret the definition for an employee’s “principal place of residence” for H-2A and H-2B workers. The updated FAQs can be viewed here.
Question: Is there existing guidance to help PPP applicants and lenders determine whether an individual employee’s principal place of residence is in the United States?
Answer: PPP applicants and lenders may consider IRS regulations (26 CFR § 1.121- 1(b)(2)) when determining whether an individual employee’s principal place of residence is in the United States. (Farm Bureau interpretation: This does not clarify if H-2A workers qualify for PPP. It offers factors to consider, some of which would indicate an H-2A worker’s principal residence is at the farm in the U.S., but some other factors wouldn’t. We expect each lender to interpret these factors on a case-by-case basis, which unfortunately leaves the H-2A question at the status quo.)
The SBA will reopen the PPP application portal on Monday, April 27 at 10:30am EDT.
Farmers should continue consulting with their accountant, tax preparer and/or financial advisor about the PPP and EIDL application for their particular situation because this additional funding will be available on a first-come-first serve basis and will go quickly.
You are encouraged you to share this information with other farmers and Farm Bureau members in your county. The details of the program, as well as access to the application, are attached. Both can also be found on the TFBF website, https://www.tnfarmbureau.org/covid-19 and the Farm Bureau Bank website, www.farmbureaubank.com. Additional information is below.