LAKE CRYSTAL, Minn. — After months of debate, Congress passed the COVID-19 Relief Package by a wide margin on December 22. The legislation authorizes nearly $900 billion in coronavirus related aid, which was part of an overall $1.4 trillion spending bill that will fund the Federal government through September of 2021. The COVID aid package includes financial support and relief for a large segment of the U.S. population and for many small businesses, including farm operations. Many of the direct payments to farmers are built off of previous payments through the CFAP program.
The COVID aid package provides a stimulus payment of $600 to any individual that earned less than $75,000, based on the adjusted gross income (AGI) on their 2019 federal tax return. Married couples with an AGI of less than $150,000 would receive a total payment of $1,200. This is half of the amount that was paid in the Federal stimulus payments under the CARES act last Spring. There would be an additional payment for every child that was claimed on the 2019 tax return. These direct aid payments are expected to be made before the end of 2020. Individuals with an AGI exceeding $99,000 or married couples with an AGI exceeding $198,000 would not be eligible for the stimulus payments. The legislation also extends supplemental unemployment benefits of $300 per week for 11 weeks through March 14, 2021.
A big portion of the latest Coronavirus relief package, approximately $284.5 billion, will be directed to assist small businesses through another round of funding to reopen and strengthen the Payroll Protection Program (PPP) through the U.S. Small Business Administration (SBA). The PPP loans will be reserved for businesses with less than 300 employees that incurred at least a 25% loss of revenue due to COVID-19. The PPP provisions allow for forgivable loans up to 2.5 times the average monthly payroll costs for the year. The maximum level for PPP loans will be $2 million, and PPP loans of less than $150,000 will have a simplified application process. While specific details on the next round of PPP loans are not yet available, farm business will likely qualify for the PPP loans again, including farm operations that file taxes as sole proprietorships. There were other provisions in the legislation that clarified eligible entities for PPP loans, eligible deductible expenses or PPP loan forgiveness, the loan forgiveness process for PPP loans under $150,000.
Approximately $13 billion in the COVID aid package was allocated toward agriculture related provisions, including about $11.2 billion allocated to USDA to support agriculture producers, processors, and contract growers that were impacted by the coronavirus pandemic in 2020. This legislation was more specific than previous COVID relief bills as to how the funding linked to agriculture related programs is to be spent. Following are the provisions in the latest COVID bill that relate to farmers and agriculture:
- Supplemental payments to row crop producers that were paid under the CFAP2 program earlier in 2020. While no specific details have yet been announced, it is likely that the additional payments will utilize a similar formula to the CFAP 2 payments, which initially paid only 80 percent of the eligible payment. The additional payments will not exceed $20 per acre. One piece of good news for farm operators with 2020 tax management challenges is that the additional payments will likely not occur until after 1-01-21.
- Additional payments to livestock producers for both market and breeding livestock that specifies payment rates for animal marketed or sold before April 15 and after that date.
- Directs the USDA Ag Secretary to provide additional assistance to some producers of livestock, dairy and specialty crops that had payments reduced by certain provisions in the CFAP1 and CFAP2 program.
- Payments to livestock and poultry producers that had to depopulate their herds or flocks, or had to euthanize market animals, due to disruptions in processing and the supply chain caused by the coronavirus pandemic.
- Payments to contract growers of livestock or poultry that had grower contracts cancelled or reduced due to the impacts of COVID-19.
- Additional payments to specialty crop producers that had processing and marketing access reduced due to the pandemic.
- Provides the USDA Ag Secretary the authority to extend the repayment deadline for CCC marketing loans an additional 3 months, which would extend the maturity date from 9 months after the loan is initiated to a 12-month loan period.
- Specifies that the producers of ethanol and biofuels are eligible for the COVID-related assistance payments, as well as extending certain tax credits for the producers of biofuels.
- Provides for an additional $1.5 billion for food purchases under the USDA Farmers to Families Food Box program and similar food aid programs.
- Provides for a 15 percent increase in Supplemental Food Assistance Program (SNAP) benefits to eligible individuals and families for the next six months.
- Allocates funding to provide grants for small meat and poultry processing plants to upgrade and expand existing processing facilities.
- There were also provisions in the legislation and funds allocated to further assist small dairy producers, to expand rural broadband access, and for farm stress programs, as well as for ag training and outreach programs.
- In a non-related item, the legislation also fully funds all 2018 and 2019 WHIP+ disaster payments, which many Midwest crop operators qualified for due to crop losses in the 2018 and 2019 crop years. Previously only 50 percent of the funding had been allocated for the 2019 WHIP+ payments. The legislation did not address any provisions for crop losses in the 2020 crop year.
In the coming weeks, there will likely be many more specific details released on the provisions and programs in the COVID relief package related to farm operators, processors, and others in the ag industry. The coronavirus pandemic has caused much personal and economic hardship to families and businesses across the U.S. in 2020, including to many family farm operations. Just as with the CARES legislation earlier this year, the previous PPP payments, and the CFAP payments, it appears that the latest COVID aid package will provide some additional much need financial assistance to many farm operations and other rural businesses.
Update on WHIP+ Payments
According to the latest information from the USDA Farm Service Agency (FSA), local FSA offices are now authorized to make payments to farmers for any 2018 and 2019 WHIP+ disaster payments on applications that have been reviewed and approved. The WHIP+ disaster payments are for eligible crop losses from the 2018 and 2019 crop years in specific areas of the U.S. Applications for the WHIP+ program closed earlier this Fall. The payments include the entire amount of approved 2018 WHIP+ payments and 50 percent of the approved 2019 WHIP+ payments. These payments will be made by the end of 2020, so farm operators need to account for these payments when doing 2020 year-end tax management. The funding for the additional 50 percent of the 2019 WHIP+ payments was just passed by Congress; however, those payments will likely not occur until 2021.
Whether or not the 2018 and 2019 WHIP+ payments occur yet in 2020, or are delayed until 2021, will vary from county-to-county, depending on the progress with processing the WHIP+ applications at local FSA offices. If applications were received by the deadline, but have not yet been processed or approved, the eligible WHIP+ payments will likely not be paid to farmers until 2021. Farm operators should check with their local FSA office regarding the status of the 2018 and 2019 WHIP+ payment for their farms.
— Kent Thiesse, Farm Management Analyst and Senior, Vice President, MinnStar Bank
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