More SE Farmer PPP Loan Detail

This post is still subject to guidance from the SBA and thus the actual rules may be different when finalized.  We have gotten several questions on this subject and here is a summary of those questions with answers.

Q. I am a Schedule F farmer and did not receive a loan the first time around since I showed a net loss on my Schedule F.  Can I still receive a loan since my gross receipts are greater than $100,000?

A. The answer is like most questions – It Depends.  If the farmer has not gotten forgiveness on the loan, then they can go back to the lender and have the lender recalculate the new loan amount and get that as a “first” PPP loan.  However, if the farmer has received forgiveness already (likely due to the bank requiring it before year-end), then our reading of the new bill is the farmer is not allowed to get additional funds on the “first” PPP loan.

Q. Since I am able to get the additional amount of “first” PPP loans based on my gross receipts, can I get a second PPP loan?

A. Again, the answer is it depends.  If you had gross receipts in a 2020 quarter compared to the same quarter in 2019 that was at least 25% lower then you qualify for another round of PPP loans.  Likely the loan amount will be the same (plus the $20,833 loan for your SE earnings assuming you had gross receipts of at least $100,000).

Q.  What is included in gross receipts?  Do I have to include gains on sale of equipment, gain on sale of breeding stock, etc.?  

A.   We will need to get guidance from SBA on this question.  Our assumption is that you will include all of those items, but no-one knows for sure right now what they will or will not include.

Q.  I am a partner in a partnership and our net income from the partnership was a loss but our gross receipts were high.  Will we qualify for an increase in our PPP loan (first or second) based on our “earnings”?

A.  We don’t know for sure.  Based on our initial reading of the bill, it appears this increase only applies to Schedule F type farmers, thus partners are stuck with no increase in their loan amount.  However, they may still qualify for a second round of PPP loans if gross receipts were at least 25% lower in any quarter in 2020 compared to 2019.

  • Principal
  • CliftonLarsonAllen
  • Walla Walla, Washington
  • 509-823-2920

Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.

Comments

It appears you can use your 2020 income now for PPP so if a partnership with no employees shows SE income to the partners in 2020 return and didn’t in 2019 can they apply as first time PPP borrowers on that income?

What is the definition of Farmer/Rancher for purposes of the PPP? Do custom feeding hog/cattle operations count? What if they file on a schedule C?

Do you think there is a chance we can choose the 3 month “Quarter” March April and May no bids for fed cattle. Compared to same 3 months in 2019 gross income was halved. June plants started bidding again and we moved a lot of heavy cattle, throws off gross on 2nd quarter.

Same questions as Will Martin.

We will need to get guidance from SBA on this. I think they would qualify but need formal guidance.

I have a farming client that had negative net income for 2019, and 2020.
But, gross receipts >$1MM.
They have no formal payroll expenses. No payroll setup, at all.

Rather they ‘rent’ their labor from a related party construction company
which carry the EE’s used for farming, on the construction company payroll.
The farm is billed the labor costs at year-end. Or a note is drawn up from the farm.

Can the farm qualify for any PPP funds under these scenarios?

The construction company has taken the first PPP.
The farm never applied, because it had no payroll and negative NI.

They should qualify for their SE earnings. If they had at least a 25% revenue reduction, they should qualify for second round. If they truly are the employer of the employees but the employee is being paid by other entity, they technically are entitled to use those wages but you will need to explain to the bank, etc. and make sure the other entity does not claim those wages.

Mr. Neiffer,
So what about farmers who didn’t even apply the first time because their net was a negative? Can they apply for round 1 now given that their gross income is over 100,000?
Appreciate your time.

We will need to get guidance from SBA on this. I think they would qualify but need formal guidance.