Impact of COVID-19 on Agriculture

Farm Bureau Asks Senate to Expand Access to PPP for Farmers

News / FBNews July 14, 2020

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The American Farm Bureau is asking Senate lawmakers to make several changes to the Paycheck Protection Program to make it more workable for farmers and ranchers.

“While the PPP is providing vital assistance to farmers and ranchers who were able to receive loans, more funding is needed to support those shut out of the program and significant changes are necessary for agricultural producers to fully participate in the PPP,” AFBF President Zippy Duvall said in letter to Senate Small Business and Entrepreneurship Committee Chair Marco Rubio (R-Fla.) and Ranking Member Ben Cardin (D-Md.).

According to data from the Small Business Administration, which administers the PPP, only 1.5% of loans were distributed to the agriculture, forestry, fishing and hunting subsector. This low participation rate is due to the lateness of SBA’s clarification of farm and ranch eligibility coupled with issues that severely limited loan amounts.

Along with additional PPP funding, Farm Bureau is recommending senators allow farms and ranches operating as sole-proprietorships to apply for PPP loans based on gross receipts.

“Based on 2017 IRS data, the most recent available, more than a third of self-employed farmers would have not received a loan from the PPP because they’ve reported net losses in the prior year. With 86% of farms and ranches organized as sole-proprietorships, the impact of this change would be significant,” Farm Bureau pointed out.

The organization is also calling for forgiveness of PPP loans of less than $150,000 upon the borrower’s completion of a simple, one-page forgiveness document; the inclusion of rental payments for all business-related items in the calculation for determining loan forgiveness; clarification that expenses incurred while operating a business under a PPP loan are deductible as normal and customary business expenses for income tax purposes; and the inclusion of income from farm equipment trades, breeding livestock and all rental income in the calculation of income for loan availability.

Farm Bureau also had labor-related PPP recommendations. In addition to providing certainty that all H-2A workers in the United States qualify as employees under the PPP and that wages paid to these employees are for loan forgiveness, the group asked that lawmakers make expenditures incurred by a grower to provide worker protection eligible for forgiveness as PPP expenses.

These expenditures go beyond providing farm workers the PPE they need to do their jobs and include costs associated with farm worker housing and transportation.

“Many growers provide housing for agricultural employees that will need to be modified to comply with federal health and safety guidelines. In some instances, growers may need to secure additional housing entirely. Growers have also taken steps to mitigate COVID-19 spread by limiting vehicle occupancy as workers travel to and from worksites each day, requiring growers to rent additional vehicles. These modifications have resulted in unplanned housing and transportation costs,” Duvall explained.

In addition, the organization shared its concerns about any qualification that would require eligible businesses to demonstrate at least a 50% reduction in gross revenue in a 2020 quarter relative to the same 2019 quarter. As noted in the letter, while there has been a considerable amount of uncertainly in commodity prices as a result of COVID-19, meeting the 50% reduction in gross revenue would likely exclude most farms and ranches.

“The ever-changing nature of agricultural markets makes it unlikely that a 50% reduction in gross revenue would persist over an entire quarter. However, this does not mean that farmers and ranchers have not experienced and are not continuing to experience significant losses and disruption in revenues. Agricultural producers were largely excluded from the first round of funding and this provision would perpetuate their inability to benefit from the program,” Duvall wrote.

Senate lawmakers return from a two-week recess the week of July 20, at which time they’ll resume debate on an additional round of COVID-19 assistance legislation. Changes to the PPP are expected to be addressed in the debate.

Farm Bureau is recommending the following changes to the Paycheck Protection Program:

  • Additional funding.
  • Allowing farms and ranches operating as sole-proprietorships to apply for PPP loans based on gross receipts.
  • Certainty that all H-2A workers in the United States qualify as employees under the PPP and that wages paid to these employees are for loan forgiveness.
  • Forgiveness of PPP loans of less than $150,000 upon the borrower’s completion of a simple, one-page forgiveness document.
  • The inclusion of rental payments for all business-related items in the calculation for determining loan forgiveness. This should include rent on a variety of business-related items including equipment, land and buildings. In addition, the utility cost of guest worker housing should be counted as an eligible utility expense.
  • Allowing expenditures incurred by a grower to provide worker protection to be eligible for forgiveness as PPP expenses.
  • Clarification that expenses incurred while operating a business under a PPP loan are deductible as normal and customary business expenses for income tax purposes.
  • Inclusion of income from farm equipment trades, breeding livestock and all rental income in the calculation of income for loan availability. The calculation should also include wages received in-kind such as commodity wages and other documented sources of income.
  • Allowing farmers to file IRS Form 943, which is the form on which agricultural employers report payroll deposits, for loan forgiveness. The current loan forgiveness form requires participants file IRS Form 941, which farmers do not use.
  • Allow Farm Credit institutions to access the set-aside for small financial lenders.

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