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Agribusiness news: The CARES Act, CFAP, H-2A visas and other developments

Apr 27, 2020

While many ag producers would tell you that they’ve been practicing social distancing their entire lives, their operations are certainly not immune to the wide-ranging effects of COVID19. 

The virus has hit particularly hard in meat packing plants, causing slowdowns and closures of several locations and directly impacting livestock producers. Concerns regarding transportation and potential breakdowns in supply chains are causing additional stress in an industry that has not recently seen its best years.

The PPP has been refunded with $310 billion

Some relief came with the CARES Act. The marquee provision of this legislation is the Paycheck Protection Program (PPP). Administered by the Small Business Administration (SBA), the PPP is a guaranteed loan program that initially had $349 billion in funding. PPP loan applications were first accepted on April 3, and the entire $349 billion was exhausted by April 16, with approximately 1.6 million loans approved. Congress has just passed a new bill, the Paycheck Protection Program and Health Care Enhancement Act, that adds $310 billion in additional funding to the PPP. 

Agricultural producers are eligible for PPP funding as long as they have 500 or fewer employees whose principal place of residence is in the United States or if they fit within the revenue-based standards of $1 million of average annual gross receipts. PPP loans are based on 2.5 times payroll costs and have a one percent interest rate with a two-year term. However, if at least 75% of loan proceeds are used to fund payroll costs for the eight weeks immediately after funding, the entire loan may be forgiven.  

Other important provisions of the CARES Act include but are not limited to:

  • Economic Impact Payments, which are an income tax credit for 2020 equal to the sum of $1,200 ($2,400 for eligible individuals filing a joint return) plus $500 for each qualifying child.
  • Penalty relief for coronavirus-related retirement plan distributions up to $100,000. This applies to qualified individuals affected by COVID-19.
  • Required minimum distributions from retirement plan participants or IRA owners are waived for 2020.
  • Increased limits on deductions for contributions of food inventory.
  • Temporary repeal of taxable income limitation for net operating losses (NOLs).
  • Modification of rules relating to NOL carrybacks.
  • Modification of limitation on losses for noncorporate taxpayers.

A variety of other provisions were also included. For additional information, please see: A breakdown of Congress’ $2 trillion coronavirus stimulus package

USDA announces new program

On April 17, U.S. Secretary of Agriculture Sonny Perdue announced the Coronavirus Food Assistance Program (CFAP). This is a $19 billion program that provides immediate relief and critical support to farmers and ranchers as well as assistance to foodbanks and the needy to help maintain the integrity of the supply chain. 

$16 billion will come in the way of direct support for producers who have suffered losses through drops in market prices and pressure on the supply chain. 

  • Livestock producers will receive $9.6 billion. Cattle producers get $5.1 billion, the struggling dairy industry will get $2.9 billion and the hog market will get $1.6 billion.
  • Farmers will receive the remainder, with $3.9 billion going to row crop farmers, $2.1 billion for specialty crop producers and $500 million for other crops.

$3 billion will be used to purchase fresh produce, dairy and meat products for distribution to food banks, community and faith-based organizations, and other nonprofits.

H-2A rules temporarily amended

On April 20, the U.S. Department of Homeland Security and U.S. Citizenship and Immigration Services (USCIS) published a temporary final rule to amend certain H-2A requirements to assist agricultural producers in avoiding disruption to lawful agricultural-related employment.   

Concerns were mounting regarding the accessibility to the labor force due to travel restrictions and visa-processing limitations as a result of COVID-19. Under this temporary final rule, all H-2A petitioners with a valid temporary labor certification can start employing certain foreign workers who are currently in the United States on a valid H-2A status. USCIS is temporarily amending regulations to permit H-2A workers to stay beyond the three year maximum currently allowable. 

Applying for a PPP loan for farmers, ranchers and agribusinesses

While the provisions above are welcome, they will no doubt miss the mark in some cases. Producers should continue to talk to their advisors to make sure they are taking every opportunity available to them to maintain cash flow in these uncertain times. 

If you need assistance maintaining cash flow or applying for a PPP loan or other loan program, contact us.

Also make sure to visit our COVID-19 resource center for further help navigating COVID-19 and our blog Ag Conversations to join in the conversation about how COVID-19 is affecting you.

Author(s)

Cook_Brad
Bradley Cook, CPA
Agribusiness Practice Leader
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