Overnight, the Senate passed a $2 trillion funding bill to blunt the worse impacts of the coronavirus (COVID-19) pandemic’s economic impact to U.S. businesses, households and workers in all sectors of the economy including food and agriculture. Formally called the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, the $2 trillion bill promises to send aid to businesses large and small, farmers, and rural communities. For the economy at large, the bill gives the federal government the resources and authority to send checks to many Americans, beef up unemployment benefits, and provide $500 billion in loans to struggling industries. The bill, which passed on a bipartisan, unanimous 96-0 vote, now goes to the House of Representatives, which is expected to pass it Friday morning with overwhelming bipartisan support. Once the House passes the bill, the President has signaled his intention to sign it into law. Here are the areas in the bill, which Congress is calling the “phase 3” funding bill, that are most important to our IDFA members.
$24 billion in Farm and Ranch Relief
Nearly $24 billion, including $14 billion for the Commodity Credit Corporation (CCC), which has been used by the Trump Administration to make MFP payments. The bill also includes $9.5 billion for a dedicated disaster fund that provides emergency aid for the whole agriculture sector.
Relief from Overweight Vehicle Limits
The bill includes language to clarify that states can issue special permits for overweight vehicles and loads to allow for the free flow of critical relief supplies during the current coronavirus outbreak for the duration of the fiscal year, through Sept. 30, 2020.
Business Tax Provisions
Delay of Payment of Employer Payroll Taxes
The legislation allows businesses to defer the 6.2% tax they pay on wages that is used to fund Social Security. The deferred tax will have to be paid over the following two years, with half to be paid by Dec. 31, 2021 and the other half by Dec. 31, 2022.
Employee Retention Credit for Employers Forced to Close by COVID-19
The provision provides a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose:
- operations were fully or partially suspended, due to a COVID-19-related shut-down order; or
- gross receipts declined by more than 50% when compared to the same quarter in the prior year.
The credit is based on qualified wages paid to the employee. For employers with more than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee.
Retail Tax Fix
Retailers, restaurateurs and hotels will be able to immediately deduct from their taxes what they spend on property improvements. They were supposed to get the write-off in the 2017 tax overhaul, but a glitch in that law made them worse off; this bill offers a fix.
Modifications for Net Operating Losses
The provision relaxes the limitations on a company’s use of losses. Net operating losses (NOL) are currently subject to a taxable-income limitation, and they cannot be carried back to reduce income in a prior tax year. The provision provides that an NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. The provision also temporarily removes the taxable income limitation to allow an NOL to fully offset income. These changes will allow companies to utilize losses and amend prior year returns, which will provide critical cash flow and liquidity during the COVID-19 emergency.
Increase Business Interest Expense Deduction
The provision temporarily increases the amount of interest expenses businesses are allowed to deduct on their tax returns, by increasing the 30% limitation to 50% of taxable income (with adjustments) for 2019 and 2020.
Acceleration of Corporate Alternative Minimum Tax (AMT) Recovery
The corporate alternative minimum tax (AMT) was repealed as part of the Tax Cuts and Jobs Act, but corporate AMT credits were made available as refundable credits over several years, ending in 2021. The provision accelerates the ability of companies to recover those AMT credits, permitting companies to claim a refund now and obtain additional cash flow during the COVID-19 emergency.
Small Business Act (SBA) Loans with Forgiveness
Increases the government guarantee of SBA loans to 100% through December 31, 2020. Funds can be used to retain workers, maintain payroll, pay leases, and make utility payments, and borrowers are eligible for loan forgiveness equal to the amount spent by the borrower during a certain 8-week period.
USDA Loans for Rural Businesses
The bill includes up to $1 billion in guaranteed loans to help rural businesses weather the economic downturn.
$25 Billion for the Supplemental Nutrition Assistance Program (SNAP) and Child Nutrition
The bill includes nearly $25 billion for food assistance, including nearly $16 billion for SNAP and nearly $9 billion for child nutrition, increasing USDA’s overall nutrition budget.
Additional Support to Food Banks
USDA will receive $450 million to provide food banks with additional resources for food and distribution.
Helping Rural America Connect
$200 Million for Telemedicine
The federal government receives $200 million for boosting Skype-style health checkups by investing in services and devices that help health care providers connect remotely with patients. The FCC helps run a rural health care program devoted to subsidizing the connectivity for health care providers.
$100 Million for Rural Broadband
Through USDA Rural Development, the bill includes up to $100 million for high-speed internet expansion in small towns and rural communities.