In December, Congress passed the Consolidated Appropriations Act (CAA), the longest bill ever passed by Congress and one of the most expensive. With all the complexity, many people are left wondering what's in it? I thought I'd pick apart the pieces relevant to agriculture.
CAA clarifies that gross income does not include forgiveness of Paycheck Protection Program (PPP) loans or Economic Injury Disaster Loans (EIDL). It also clarifies that the expenses used to obtain forgiveness are deductible. In essence, PPP is tax-free for federal tax purposes. CAA also authorized an additional $284 billion for another round of PPP loans. Please keep in mind that while the tax treatment was clarified for federal tax purposes, many states have not provided guidance or have said they will tax the forgiven piece of the PPP loan.
PPP GROSS REVENUE:
Farmers who are sole proprietors, independent contractors or self-employed now can use gross receipts for the PPP calculation. If you have not applied for a PPP loan or have not filed for forgiveness, you have the opportunity (through March 31) to apply or modify your PPP loan based on gross receipts.
FARM NET OPERATING LOSS:
The Tax Cuts and Jobs Act (TCJA) limited farm loss carrybacks to two years. The Coronavirus Aid, Relief and Economic Security (CARES) Act delayed TCJA until 2021. Now, the CAA allowed farmers who elected the two-year carryback prior to the CARES Act to retain the two-year carryback (rather than the five-year required under the CARES Act). The CAA also allows farmers who elected to waive the carryback to revoke the waiver.
COVID PAYROLL TAX CREDITS:
CAA did not extend the Families First Coronavirus Response Act (FFCRA), but it allows employers to voluntarily extend FFCRA leave to March 31, 2021, and claim the same tax credit.
CAA allows a 100% business expense for meals as long as the food was provided by a restaurant. At present, it is unclear if this applies to takeout or catering.
CFAP 3, CROPS:
With the Coronavirus Food Assistance Program, farmers may receive $20 per planted acre for trigger crops and flat crops -- including corn, soybeans, barley, cotton, wheat, alfalfa, canola, oats, sugar beets, cane and rice (to name a few).
CFAP 3, DAIRY:
Some dairy producers will be eligible for increased payment under the Dairy Margin Coverage Program. Also, an additional $400 million will be allocated to a dairy donation program that purchases milk from producers and is donated to charities.
CFAP 3, LIVESTOCK:
Growers of livestock and poultry are eligible for a per head based on the CFAP 2 formula with some modifications. They are also eligible for an 80% fair market value reimbursement for euthanized animals due to processing issues due to COVID.
DTN Tax Columnist Rod Mauszycki, J.D., MBT, is a tax principal with CLA (CliftonLarsonAllen) in Minneapolis, Minnesota. Read Rod's "Ask the Taxman" column at about.dtnpf.com/tax. You may email Rod at email@example.com.
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