SBA PPP Loan and the Schedule F filer

Agricultural clients:

Previously, under SBA rules, farmers’ participation in the PPP was based on 2019 net farm profits (or losses), reported on IRS form Schedule F, Profit or Loss from Farming, plus wages paid. Based on 2017 IRS data, 37 percent of self-employed farmers would have not received a loan from the PPP because of reported net losses in the prior year. 2019 also was not a good year for self-employed farmers and ranchers due to devastating natural disasters and trade wars. As a result, many farmers and ranchers may not have applied for a PPP loan or received a small loan due to low or negative 2019 profits.

The new legislation helps farmers and ranchers by allowing them to use their 2019 Schedule F gross income(up to $100,000) when calculating their PPP loan, rather than their 2019 net income. The bill also would allow farmers and ranchers who received a PPP loan using their 2019 net income to recalculate their loan award using 2019 gross income if it would result in a larger loan amount. Lenders may recalculate loans that have not been previously approved if they would result in a larger loan.

For PPP loans that are not already forgiven, the borrower can amend their original application for the $20,833 allowed for the gross wages of the Schedule F owner. i.e. A loan is limited to 2.5 months of average monthly payroll with a $100,000 annual gross income cap. So, a farmer or rancher with no employees could get a $20,833 loan if the gross receipts on the Schedule F for 2019 were $100,000 or greater, regardless of what the expenses were. If the farmer had employees, the loan amount would be increased by the same 2.5 months of the average monthly payroll for 2019.

For PPP loans that have been forgiven, you will need to meet the reduction in gross revenues in order to file for additional funding. This reduction is 25% for any quarter in 2020 as compared to the same quarter in 2019.

Please contact our office regarding your specific situation and let us know if you need assistance with your PPP determination and application.

 

Westbrook CPA