Much of the latest Covid-19 relief plan that was passed by Congress in late December was aimed at helping small businesses through another round of funding to reopen and strengthen the Payroll Protection Program (PPP) through the US Small Business Administration (SBA).
PPP loans will be reserved for companies with less than 300 employees, as well as companies that have suffered a loss of revenue of at least 25% due to Covid-19 during a specific quarter of the year in 2020 , compared to the similar quarter in 2019. PPP arrangements allow forgivable loans up to 2.5 times the average monthly salary costs for the year. The maximum level of PPP loans will be $ 2 million, and PPP loans under $ 150,000 will have a streamlined application process.
The latest legislation allows some self-employed workers to reapply for first round PPP loans, as well as apply for second round PPP loans. The SBA has announced that the reopening of Round 1 PPP loans will begin on January 11, with applications for Round 2 PPP loans likely to begin in the near future.
As with previous PPP loans, this round of PPP loans will again be managed by local financial institutions. Farm businesses will once again be eligible for this new round of PPP loans, including farms that file taxes as a sole proprietorship. Here are some details and clarifications regarding PPP loan applications related to agriculture:
Clarification on round 1 of PPP loans: It appears that self-employed farmers (sole proprietorships) who were not eligible for the first round of PPP loan payments due to negative net farm income on Schedule F of their 2019 federal income tax return can now apply the first round of PPP loan repayments. However, not all details are yet clear on this process.
About 37% of farms, including many farmers in southern Minnesota, were ineligible for the first round of PPP loan payments due to negative farm profits in 2019 following the poor crop year in 2019. The revised PPP loan application for sole proprietorships is based on gross farm income in the 2019 tax return, up to a maximum of $ 100,000.
Based on the PPP loan calculation formula, a farm could be eligible for a maximum first-round PPP loan payment of $ 20,833 ($ 100,000 divided by 12 times 2.5). Farmers who applied for the first round PPP loans as a sole proprietorship and received less than the maximum of $ 20,833 may be eligible to apply for an additional first round PPP loan up to the maximum amount. The previous dollar amounts of the first round PPP loans that were received and canceled would be deducted from the maximum PPP loan amount for which these farmers are eligible. Farms whose employees have filed as a partnership or corporation are unlikely to be significantly affected by this change.
Details of the new cycle n ° 2 of PPP loans: Self-employed farmers could potentially again be eligible for the second round of PPP loans. The same maximum gross income level of $ 100,000 and the same maximum PPP loan payment that existed in cycle # 1 of PPP loans for farmers filing as sole proprietorships will exist for cycle PPP loan applications. n ° 2.
However, farms will need to show a drop in income of at least 25% for one quarter in 2020, compared to a similar quarter in 2019. For some farmers who were affected by the poor crop year in 2019 and who had less grain stocks to be sold in early 2020, meeting the 25% reduction threshold will no longer be a problem. Farmers who had higher yields in 2019 might have a bit more difficulty qualifying for second-round PPP loans, depending on the timing of their grain sales and government program income. It is likely that many ranchers will be able to qualify for the final PPP loan payments, due to large losses mid-year in 2020.
There are still unanswered questions regarding the latest round of PPP Farm Loans, so watch for more details. For details on PPP loan applications, farmers and other businesses should contact their local lender or visit the SBA website at: www.sba.gov/.
General CRP registration in progress
The United States Department of Agriculture (USDA) has announced an open enrollment period for the Conservation Reserve Program (CRP) from Jan.4 to Feb.12.
This will be the second period of enrollment in the general CRP program since the enactment of the Agricultural Law of 2018 and it will be the 55th enrollment period in the CRP since the start of the CRP program in 1986. There is also an enrollment. in progress for the program. Continuous CRP program. The CRP program was established in the 1985 Farm Bill and has just completed its 35th year of existence in 2020. The CRP program aims to remove more environmentally sensitive cropland from production, with an emphasis on protecting the environment. water quality, improvement of wildlife habitat, improvement of air quality and fight against soil erosion.
There were over 30 million acres in the CRP program from 1990 to 2010, with the CRP area decreasing from 2010 to today. The maximum area of ​​CRP will now be gradually increased under the 2018 Farm Bill to reach a maximum of 27 million acres of CRP by 2023.
Currently, there are just under 20.77 million acres enrolled in the CRP program, of which 13.2 million acres under general CRP contracts, 6.5 million acres under continuous CRP contracts and the remainder enrolled in the CRP program. special CRP programs. There are 3 million acres currently under a CRP contract that will expire September 30 that are eligible for re-enrollment in CRP during the current enrollment period.
Landowners may also consider putting new land in the CRP during the general CRP registration period. To be eligible for the CRP, the land must have been owned or operated for at least 12 months before the end of the CRP registration period.
Additionally, CRP eligibility requires that the land has been planted or considered planted in four of the six years from 2012 to 2017. Farmers and landowners may want to assess some difficult cultivated areas, which have been particularly exposed to extreme weather conditions during the recent harvest. years, for possible registration in the CRP program.
Under the general CRP program, landowners submit bids to register land in the CRP program as of October 1 following the 2021 crop year. The duration of CRP contracts is 10 to 15 years. CRP offers will be evaluated and ranked based on the “Environmental Benefits Index†(EBI) to determine which acres will be accepted into the CRP program in 2021. EBI factors include:
- Benefits to wildlife habitat resulting from proposed cover on CRP acres
- Water quality benefits from reduced erosion, runoff and leaching
- The on-farm benefits of erosion reduction
- Long-term benefits that are likely to last beyond the term of the CRP contract
- Air quality benefits from reduced wind erosion
- Cost factor, as growers are allowed to submit rental bids for the proposed CRP acres
The 2018 Farm Bill set the maximum CRP rental rates at 85% of the county average rental rates for CRP acres listed under the general CRP program. Property owners may offer rental rates lower than the maximum rate under the general CRP program to increase the likelihood that their CRP offer will be accepted.
Landowners can also enroll eligible acres in the ongoing CRP program, which is designed for the most environmentally sensitive lands. The ongoing CRP program does not require a competitive bidding process for acres to be accepted into the CRP, and annual rental rates are pre-set at 90% of the county average rental rate. The USDA Farm Service Agency (FSA) also provides cost-shared assistance up to 50% of the total cost to establish approved coverage on acres that are accepted into the CRP program.
Kent Thiesse is a farm management analyst and senior vice president of MinnStar Bank in Lake Crystal, Minnesota.
