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11 Highlights You Need to Know About the New Stimulus Package

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This blog provides a summary of the stimulus bill passed by Congress and signed by President Trump on Sunday, December 27, 2020. 

1. Paycheck Protection Program Tax Treatment The Bill effectively makes all funds from PPP non-taxable by amending the original language to say:

     a. No amount received from the PPP is included in gross income; and
     b. No deductions can be denied, tax attributions reduced or basis increase denied because the PPP funds are excluded from gross income
     c. Note: This language also applies to the new program.

2. Loan Forgiveness under Paycheck Protection Program
     a. The amounts received under EIDL are no longer reduced from the loan forgiveness amount
     b. Borrowers can select a date for the ending of the covered period anytime after 8 weeks from the start and up to 24 weeks after the start
     c. Loans under $150,000 are forgiven if the recipient:
               i. certifies to the lender in writing within 24 Days from the date of this Act an accounting of the number of employees the recipient was able to retain because of the loan and the estimated amount of the loan spent on payroll costs and the total loan amount;
               ii. Attests they accurately provided the required certification and complied with the requirements; and
               iii. Retains employment records for 4 years and other records for 3 years
               No other documentation is required, except in case of an audit
               iv. BUT the same rules still apply meaning you have to meet the test for forgiveness (Use 60% of funds for payroll and account for FTE reductions)
     d. The applications for forgiveness for loans over $150,000 are not changing

3. Amendments to Paycheck Protection Program:
     a. Additional expenses are allowed for:
               i. Covered operations expenses – payment for software or cloud services that facilitates operations, product/service delivery, processing, payment or tracking of payroll expenses, HR, sales/billing/accounting or tracking supplies/inventory
               ii. Covered property damage – costs relating to property damage/vandalism or looting not covered by insurance
               iii. Covered supplier costs – expenses by entities to a supplier of goods if those goods were essential to the operations of the entity at the time the expense was incurred and made pursuant to a contract/PO in effect prior to the covered period or with respect to perishable goods
               iv. Covered worker protection expenses – any operation or capital expense used to adapt the environment to comply with CDC health guidelines from March 1 2020 until there is no longer a national emergency in declaration.
                         1. Examples: Drive-through windows, physical barriers like sneeze guards, ventilation or filtration systems, expansion of indoor/outdoor spaces, screening capabilities, purchase of PPE
     b. Lenders can rely on documentation and the lender is not subject to penalties relating to loan forgiveness if they act in good faith based on reliance
     c. Clarifies that group life, disability, vision and dental insurance can be included as a benefit eligible for reimbursement
     d. Loans are now permitted for some borrowers in bankruptcy
     e. If, under the new rules, you are eligible for more $, you can request an increase in your loan amount

4. Paycheck Protection Program Second Draw Loans
     a. Eligibility:
               i. Eligible Entity: non-profits, cooperatives, entities, self-employed individuals, sole-proprietor, ag co-ops that
                          1. Employ fewer than 300 people and
                          2. Has gross receipts in first, second, third quarter (4th quarter, but only if you apply after  January 1, 2021) that are 25% lower than the gross receipts from the same entity in the same quarter in 2019
                                  a. Note there are rules that talk about what to do if you were not in business during 1, 2, 3 or even 4th quarter of 2019 –
     b. Loan Amount: Lower of
               i. Average monthly payroll costs during the year before the loan is made or Calendar year 2019 multiplied by 2.5; or
                         1. If Seasonal: You can pick a 12 week period between February 15, 2019 and February 15, 2020 multiplied by 2.5
                         2. If a New Entity: Average monthly payroll on the date you apply multiplied by 2.5
               ii. $2M Cap
               iii. The food sector – NAICS Code starting with 72 is multiplied by 3.5
     c. Loan Forgiveness –
               i. Works exactly the same way as the original PPP program.   
               ii. Amount: Payroll Costs, Interest, rent, utilities, covered operations expense, covered property damage cost, covered supplier cost, covered worker protection expense – Payroll costs must be 60% of total
     d. What about Necessity Test?
               i. When you apply for the loans you must certify the loan is “necessary to support the on-going operations of the applicant”
               ii. While SBA said they were not auditing loans under $2M the first time around, keep this in mind because the penalties can be quite substantial

5. Farmer/Rancher Provisions for Paycheck Protection Program – Calculating Loan Amounts
      a. If you are a farmer with no employees – Schedule F income (up to $100K) divided by 12 and multiplied by 2.5
     b. If you are a farmer with employees – Use the same calculation of the average monthly payroll multiplied by 2.5 average but add to it the gross income (per schedule F) of the covered recipient

6. Ag Programs
      a. Allocated $11 Billion to respond to coronavirus for support of ag producers, growers, producers of the food systems including restaurants and schools
     b. Price Trigger and flat rate crops from CFAP2 get a payment equal to $20/acre
                i. Crops include: barley, corn, cotton, sorghum, soybeans, sunflowers, wheat, alfalfa, amaranth grain, buckwheat, canola, Extra Long Staple (ELS) cotton, crambe (colewort), einkorn, emmer, flax, guar, hemp, indigo industrial rice, kenaf, khorasan, millet, mustard, oats, peanuts, quinoa, rapeseed, rice, sweet rice, wild rice, rye, safflower, sesame, speltz, sugar beets, sugarcane, teff, and triticale
     c. Sales Commodities under CFAP2
               i. Can include crop insurance payments
               ii. Can use 2018 sales instead of 2019 sales
     d. Payments to livestock/poultry equal for losses due to depopulation prior to this bill being signed equal to 80% of FMV plus the costs minus state reimbursement
               i. Note – no guidance on how to calculate FMV
     e. Cattle – See chart – For unpriced cattle inventory between April 16, 2020 an May 14, 2020 in an amount equal to the chart below

Commodity CARES Act CCC Payment CFAP 2 Rate Percentage Payment
  # Cattle Sold Jan 15-April 15 Unpriced Inventory April 16 - May 14      
Slaughter & Mature Cattle  92                                                          33 55 25% 1.00
Slaughter & Fed Cattle $                                        214 $                                                         33 55 50% 63.00
Feeder Cattle < 600 lbs $                                       102 $                                                         33 55 50% 7.00
Feeder Cattle > 600 lbs $                                       139 $                                                         33 55 50% 25.50
All other Cattle $                                       102 $                                                         33 55 25% 3.50


     f. Dairy Margin Coverage - supplemental payments will be made when actual dairy production margins for a month are less than the coverage level threshold
     g. Grants are available for meat packing facilities

7. Stimulus Checks
     a. $600 per individual - $1200 for couples
     b. $600 per qualifying children
     c. $150,000 or less taxable income if filing jointly - $112,500 for head of household and $75,000 for all others
     d. If make more than those amounts – will receive reductions similar to the last round

8. Unemployment Benefits
     a. Benefits eligible for 50 weeks
     b. Expand unemployment benefits by $300 from December 26, 2020 to March 14, 2021
     c. Repayment amounts must be paid by end of 2021

9. Employee Tax Credit
     a. Extends payroll tax credit through July 1, 2021
     b. Expands the amount from 50% up to 70% of wages up to $10K in any quarter rather than all calendar quarters

10. New Targeted EIDL Program
     a. Eligibility:
               i. Under 300 employees
               ii. Suffer economic loss of more than 30%
              iii. In low-income community
     b. Interest rate is 3.75%
     c. Can receive full $10K portion as grant
     d. Loans available through December 2021

11. EIDL Program
     a. Eligibility extended through December 2021 and more funds allocated to the program

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Written By

Michelle Goeke

Michelle Goeke

General Counsel & Business Design Specialist

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