USDA Coronavirus Aid for Agriculture

President Trump announced a $19 billion relief package to help farmers and ranchers deal with the impacts of the coronavirus pandemic. The relief package will come through the Coronavirus Food Assistance Program (CFAP). The program will provide $16 billion in direct support for agricultural producers based on actual losses where prices and market supply chains have been impacted. It will also assist producers with additional adjustments and marketing costs resulting from lost demand and short-term over supply caused by COVID-19 in the 2020 marketing year. USDA will also partner with regional and local distributors, whose workforce has been significantly impacted by the closure of many restaurants, hotels, and other food service entities to purchase with regional and local distributors to purchase $3 billion in fresh produce, dairy, and meat. Additional details will be provided as more clarification is released on USDA package details. View the USDA press release here.

Forgivable Loans through the SBA

Paycheck Protection Program

What is PPP?

The $350 billion Paycheck Protection Program (PPP) is designed to support small businesses, including farms and ranches, through the CARES Act. Operations with fewer than 500 employees will be eligible to receive  “forgivable loans” for approved expenses outlined by the program. Recently, Congress allocated an additional $310 billion to be distributed starting April 27.

Application

Applications for PPP opened April 3. Just 14 days after enrollment for PPP originally opened, the fund was depleted. Agricultural applicants accounted for just 1.3 percent of approved funding. The Small Business Administration (SBA) announced they would resume accepting PPP loan applications on April 27 from approved lenders on behalf of any eligible borrower.

Farmers and ranchers seeking funding from PPP should apply for the second round of funding as soon as possible because it is anticipated that funds will be exhausted once again. PPP applications will not be accepted after June 10.

Eligibility

If you are a farmer or rancher whose business has been operational as of Feb. 15, 2020, you are eligible to apply for PPP. The following entities are eligible:

  • Sole proprietor farmers and ranchers who report income and pay taxes by filing a  Schedule F tax return
  • Independent contractors who collect 1099-MISC forms
  • C&S Corporation owners without employees, other than themselves, and who pay themselves a salary
  • 1065 partnership owners who have no employees other than the owners

How does PPP work?

The primary goal of PPP is to help Americans stay employed and retain their salaries. Because the program focuses on payroll, the support is calculated by multiplying the farmer or rancher’s average monthly payroll expenses by 2.5. The amount of support cannot exceed $100,000 for individuals.

PPP is not based on a  farm or ranch’s profit. Instead, the loan focuses on what the farmer or rancher paid that was subject to payroll or self-employment taxes.

If the farmer or rancher continues to operate as usual—maintaining employee salary and retaining the same number of employees—the loan can be almost entirely forgiven without tax liability for the portion of the loan that is forgiven. It’s fair to look at the loan as a tax-free grant to maintain the farmer or rancher’s monetary functions prior to the pandemic for eight weeks.

Office lease, rent or mortgage interest (as of Feb. 15, 2020) can be paid using PPP funding as long as the items do not account for more than 25 percent of the loan amount. If the farmer or rancher operates from a home office, the percentage of the home that  functions as an office may be claimed. Collect paid invoices, statements, lease agreements or cancelled checks to prove expenses.

Applying for PPP

PPP loans are being administered by approved SBA lenders and are technically a new form of the existing SBA 7(a) loan program. Farmers and ranchers can apply for PPP through any of the 1,800 participating SBA approved 7(a) lenders or through any participating federally insured depository institution, federally insured credit unions and the Farm Credit System institution.

To start the process of applying for PPP, consult with local lenders. If local lenders have not been approved to participate or a lender cannot be located, the farmer and rancher can utilize the SBA PPP lender search tool.

FiscalNote has compiled a comprehensive list of SBA 7(a) approved lenders here. The list provides a list of community banks, credit unions, nonprofit organizations and online lenders who are available to assist farmers and ranchers acquire a PPP loan. 

It is extremely important to follow the paths outlined by SBA when applying for PPP. The Federal Trade Commission has already filed a case against a scammer who had taken advantage of a small business during this critical time, according to Investopedia. As long as borrowers follow SBA guidelines, they are protected against illegal activity.

FAQs

I am a farmer with no salaried employees. Do I qualify for PPP?

Potentially. According to multiple sources, if you are a sole proprietor and report your income through a Schedule F, your salary is determined by your net profit on that schedule. If you were operational in 2019 and have filed your 2019 taxes, this will be reported on line 34 of your Schedule F. If line 34 was negative, you do not qualify. If you have yet to file your 2019 taxes, but have bookkeeping for your business through 2019, this will be the Net Profit line on your income statement.

Your monthly average payroll expense will be your annual net profit divided by 12. If your annual net profit is over $100,000, you may only claim up to $100,000. Your loan amount will be that amount times 2.5.

If you run a sole proprietorship with a spouse, you will only apply to the PPP once, and your spouse would not be considered to have a salary through the business unless he or she was paid as a contractor prior to February 15, 2020. You can apply separately for as many businesses you own that have separate identification numbers or are reported separately. You may apply for the PPP once with your Social Security Number as a sole proprietor, and then separately for any other businesses you own using their Employer Identification Numbers.

What line on my Schedule F reports my salary?

If you are a sole proprietor and report your income through a Schedule F, your salary is determined by your net profit on that schedule. If you were operational in 2019 and have filed your 2019 taxes, this will be reported on line 34 of your Schedule F.

Where do I apply for PPP?

To start the process of applying for PPP, consult with local lenders. If local lenders have not been approved to participate or a lender cannot be located, the farmer and rancher can utilize the SBA PPP lender search tool.

FiscalNote has compiled a comprehensive list of SBA 7(a) approved lenders here. The list provides a list of community banks, credit unions, nonprofit organizations and online lenders.

Will I be audited?

Multiple sources report an audit may be required; however, it is unclear at this point how extensive the audits will be. Regardless, there will be a requirement to document payroll was maintained and only qualified expenses were covered using PPP funds as required for loan forgiveness. You will also be required to make a good faith certification that you are affected by COVID-19. 

Will receiving PPP funds affect my farm program payment eligibility or limits?

No. PPP is a standalone program with no effects on farm program payment eligibility or limits.

DHS and USDA Temporarily Amend Some H2-A Guidelines

The Department of Homeland Security (DHS), with the support of the U.S. Department of Agriculture (USDA), has announced a temporary final rule to change certain H-2A requirements. Under this temporary final rule, an H-2A petitioner with a valid temporary labor certification who is concerned that workers will be unable to enter the country due to travel restrictions can start employing certain foreign workers who are currently in H-2A status in the United States immediately after United States Citizenship and Immigration Services (USCIS) receives the H-2A petition, but no earlier than the start date of employment listed on the petition. To take advantage of this time-limited change in regulatory requirements, the H-2A worker seeking to change employers must already be in the United States and in valid H-2A status. Additionally, USCIS is temporarily amending its regulations to protect the country’s food supply chain by allowing H-2A workers to stay beyond the three-year maximum allowable period of stay in the United States. For more detailed information on this program visit the United States Citizenship and Immigration Services website.

Agriculture = Essential Work

Employee Letter

Download and edit this letter so your company can provide it to employees citing the federal government’s definition of Essential Employees.

If you decide to use this letter, please place it on your company letterhead and complete the sections in RED at the bottom. Each employee will need a copy and must carry it with them at all times when traveling for work in those regions which have shelter-in-place or similar restrictive travel limits.