Both the Minnesota state legislature and the federal government recently passed bills in response to the COVID-19 situation.
The laws have major financial implications for individuals and businesses, including farmers. These laws are especially important to understand if your farm or agribusiness employs workers.
In a recent blog post, Megan Roberts, Extension educator, detailed the Families First Act and the CARES Act, and their impacts on Minnesotan small-business owners. The blog post was updated on April 23, 2020 to reflect new legislation and funding, including Economic Injury Disaster Loans (EIDL). While farmers were not eligible in the original CARES act for EIDLs, the April revision specifically makes farms eligible for EIDLs related to COVID-19.
Funding may lapse quickly, so farm businesses should work immediately with their lending professionals to access federal loans, as applicable.
Families First Act
The Families First Coronavirus Response Act, H.R.6201, became law on March 18, 2020.
Referred to as the Families First act, it requires employers to offer paid sick leave for specific reasons related to COVID-19. This immediate requirement to provide sick leave includes farm and agricultural employers with very limited exceptions.
For employers with less than 500 workers, the Internal Revenue Service (IRS) will offer a tax credit to reimburse dollar for dollar the cost of providing the paid sick leave. Guidance by the U.S. Treasury Department, the U.S. Department of Labor and IRS explains how employers can preserve funds in a more immediate way by retaining payroll taxes.
CARES Act
The Coronavirus Aid, Relief, and Economic Security Act, H.R. 748, became law on March 27, 2020. A related law, the Paycheck Protection Program and Health Care Enhancement Act, H.R. 266 became law on April 24, 2020, replenishing several funds from the CARES act.
For individuals, the major provision of this law is the availability of “economic impact” payments. The IRS will distribute a financial stimulus to most individual taxpayers with no action required in nearly all circumstances. Most farmers will qualify for these individual payments.
Farms with employees should consider two provisions of the CARES Act:
- The first provision is a payroll tax deferment option for employers. The deferment period is between March and the end of December 2020.
- The second provision is a Small Business Administration (SBA) forgivable loan called the Paycheck Protection Program (PPP). Additional PPP funds became available in late April, making the combined total directly available to small businesses through PPP $659 billion.
- The loans are administered through participating bank and lending institutions with pre-existing SBA relationships, including the Farm Credit system.
- The loan is 2.5 times your average monthly payroll cost.
- Here is an example application form.
- Sign up for business owners, including farmers with employees, began Friday, April 3, 2020. Self-employed farmers without employees may also qualify.
These two CARES act business provisions are an either/or option, you cannot pick both payroll deferment and PPP.
Under the Paycheck Protection Program and Health Care Enhancement act, farms are also now eligible to apply for SBA’s COVID-19 emergency loan advances of up to $10,000.
This is an evolving situation. Rules and regulations are still being written by associated federal agencies.
Source : umn.edu