By Randy Gordon, President and CEO; and Max Fisher, Vice President, Economics and Government Relations
The latest round of approximately $900 billion in COVID-19 economic relief enacted late last year as part of a total $2.3 trillion bill that also funded the federal government for the remainder of the 2021 fiscal year (which ends Sept. 30) provided approximately $13 billion for agriculture and food programs, as well as recharged and streamlined rules governing the Paycheck Protection Program (PPP).
Congress approved the legislation on Dec. 21 but it wasn’t signed into law by President Trump until Dec. 27 after he first threatened to veto the measure and subsequently when signing it called for an increase to $2,000 per person in COVID-19 stimulus checks, which the Senate ultimately blocked.
As enacted, the law provides a refundable tax credit of $600 per eligible taxpayer ($1,200 for married couples filing jointly), in addition to $600 per qualifying child. The credit phases out starting at $75,000 of modified adjusted gross income for individuals; $112,500 for heads of households and $150,000 for married persons filing jointly) at a rate of $5 per $100 of additional income.
The law also provides $300 per week in supplemental unemployment insurance benefits for the period Dec. 26 through March 14 – down from the $600 level provided in the earlier relief package.
Among other things, the law provides up to an additional $284 billion for another round of PPP loans. The law’s agricultural provisions mandate additional payments for crop and livestock producers, as well as authorize the secretary of agriculture to provide payments through the Commodity Credit Corporation to producers of ethanol and renewable fuels, conventional and advanced biofuels, biomass-based biodiesel and cellulosic biofuels.
The law also extends key renewable fuel tax credit provisions. These include: 1) a one-year extension of the Section 40 second generation biofuel producer tax credit, which provides a $1.01 per gallon credit for such fuels; 2) the 50-cent-per-gallon excise tax credit for alternative fuel and alternative-fuel mixtures; and 3) a two-year extension of the Section 45Q tax credit, which is provided on a per-ton-basis for carbon dioxide sequestered. The measure also extends through 2021 the credit (capped at $30,000 per location) for installing alternative fuel vehicle refueling stations, including those that dispense ethanol, biodiesel, natural gas, hydrogen and electricity.
While NGFA advocated inclusion of several provisions that ultimately were enacted, the new law failed to address one of the Association’s goals – COVID-19 liability protection for employers to protect against frivolous lawsuits – despite the efforts of Senate Majority Leader Mitch McConnell, R-Ky., and others to include it.
Here’s an overview of the law’s significant provisions of interest to the grain, feed and processing industry:
Paycheck Protection Program (PPP): The revisions to PPP authorize businesses that previously received such loans to reapply for additional loans – under a so-called “PPP second-draw.” Generally, borrowers may receive PPP loans amounting to as much as 2.5 times their average monthly payroll costs in the year prior to the loan or calendar year, up to a maximum of $2 million per borrower. To qualify for this PPP second-draw, firms are required to: 1) employ 300 or fewer persons (per facility for companies operating multiple facilities); 2) have used or will use the full amount of their previous PPP loan; and 3) demonstrate a 25 percent gross revenue decline in any 2020 quarter compared to the same quarter of 2019.
For first-time PPP applicants, the law allows firms with 500 or fewer employers to apply so long as they do so by March 31, 2021. It also authorizes businesses that returned part or all of their previous PPP loans to reapply for the maximum amount available to them. Publicly traded companies remain ineligible for PPP loans.
Importantly, to qualify for loan forgiveness, the requirement remains that no more than 40 percent of the forgiven amount can be for non-payroll costs.
Further, the law mandates that business expenses paid with forgiven PPP loans are tax-deductible, thereby correcting previous Internal Revenue Service guidance that such expenses could not be deducted. New expenses added to those considered eligible for the tax deduction include: 1) operating expenses (e.g., software, cloud computing and human resource and accounting needs); 2) property damage costs not covered by insurance; 3) supplier costs (pursuant to contract, purchase order or order for goods in effect prior to taking out the loan that are essential to the borrower’s operations at the time the expenditures were made); and 4) worker-protection expenditures (such as those incurred from purchasing personal protective equipment and other investments (e.g., plexiglass, etc.) made from March 1, 2020 and the eventual end of the presidential COVID-19 national emergency declaration to comply with federal or state COVID-19 health and safety guidance. The new law also clarifies that employer-provided group insurance benefits (e.g., life, disability, vision or dental insurance) are included within eligible payroll costs and provides that such payments are retroactive.
Finally, the law further streamlined the procedures for forgiving PPP loans of less than $150,000, regardless of when those loans were issued. Specifically, the new law provides for loan forgiveness based upon the borrower signing and submitting to its lender a no-longer-than one-page certification that includes a description of the number of employees the borrower was able to retain because of the PPP loan, the estimated total amount of the loan spent on payroll costs and the total loan amount. The borrower also is required to attest that it accurately provided the required certification and complied with PPP loan requirements.
Agricultural Provisions: As noted previously, approximately $13 billion of the COVID-19 relief package is devoted to agriculture. It includes the following:
- Crops: Of the total, the law provides about $11.2 billion of direct financial assistance to commodity producers. Growers of so-called “price-trigger crops” and “flat-rate crops” are eligible to receive payments of $20 per acre. Covered “price-trigger” commodities include those that meet a minimum of a 5 percent price decline over a specified period, and include barley, corn, sorghum, soybeans, sunflowers, upland cotton and all wheat classes. As an example, given that 91 million acres of corn were planted in 2020, a $20-per-acre payment would amount to roughly $1.8 billion in additional financial support for that sector. Across these seven “price-trigger” crops, 240 million acres were planted in 2020, totaling $4.8 billion in potential payments.
Meanwhile, “flat-rate” crops are those that either do not meet the 5 percent price decline trigger or do not have sufficient data available to calculate a price change. These crops also are eligible for $20-per-acre payments. Such commodities include alfalfa, amaranth grain, buckwheat, canola, extra-long staple cotton, crambe, 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. The law contains a provision allowing the secretary of agriculture to adjust direct support payments to account for price differentiation among commodities, including specialized varieties, certified organic and local markets.
In addition, the secretary of agriculture is authorized to extend the repayment term for marketing assistance loans by three months – to 12 months.
- Livestock and Poultry: The law, for the first time, authorizes up to $1 billion in payments to contract growers of poultry and other livestock to cover up to 80 percent of their market losses. It also directs the secretary of agriculture to compensate livestock and poultry producers for losses incurred from depopulating their herds or flocks given insufficient access to meat processing facilities during the pandemic. The depopulation payments are to amount to 80 percent of the fair market value of the animals, as well as for the cost of depopulation.
The livestock and poultry provisions also: 1) allocate about $870 million for a supplemental Dairy Margin Coverage program; 2) extend mandatory livestock price reporting for one year; 3) amend rules designed to facilitate the interstate movement of animals; 4) require a study on programs for meat and poultry processing and slaughter facilities; 5) provide $60 million in grants to small meat and poultry processors to improve their plants to facilitate compliance with federal food safety inspection standards; and 6) include $1.4 billion in additional inventory-based direct payments for various classes of cattle, including breeding stock, sold after April 15, 2020.
Other Provisions: Other provisions include $7 billion to fund expanded rural broadband to enhance internet access. The law also provides $1.5 billion for the U.S. Department of Agriculture’s food purchase and distribution programs for non-profit organizations, as well as to provide grants and loans to small or mid-size food processors or distributors. In addition, it allocates $400 million for a dairy donation program that will pay milk processors the full value of milk used to produce dairy products donated to food-assistance programs. Finally, the measure includes a 15 percent increase in the Supplemental Food Assistance Program (i.e., food stamps) for six months (through June 30, 2021).