Among several provisions built in to the 5,500 plus page legislation now known as the Consolidated Appropriations Act, 2021 (CAA) which was approved by Congress on December 21, 2020, there is one such provision related to the ever-popular Paycheck Protection Program (PPP) that yields a call to action for farmers. This is the Economic Aid Act (EAA), which was subsequently signed into law on December 27, 2020.
This new Act extends the timeline of the original PPP funding to March 31, 2021 and brought a whole slew of new Interim Final Rules related to the PPP from the Small Business Administration. Within this legislation and new rules are provisions allowing businesses that either did not receive funding from the first round of PPP or did not maximize their funding to still apply for those funds.
Why is that important if you did not qualify for the first round?
The EAA also provided a new loan calculation for self-employed Farmers based on GROSS Schedule F income (line 9), rather than NET Schedule F income (line 34) – directly referenced here. Anyone that looks closely at their personal Schedule F can find that these two numbers may be VERY different, with expenses such as grain inputs, depreciation, and cost of labor being examples of costs included in their NET number, but not in their gross number.
It is important to note that this new calculation guidance only applies to NEW PPP applicants, or to those with an existing PPP loan that has not yet been forgiven.
In addition, farmers may use this calculation for the second round of PPP loans (PPP2), assuming they otherwise meet the 25% reduction in gross RECEIPTS test for any calendar quarter in 2020 compared to the same period in 2019, or 2020 annual compared to 2019.
For more information, including how to calculate the allowable amount of PPP, check out our other blog post about the CAA, refer to the US Department of Treasury’s website, or contact our tax and advisory team today.