Farmers Turn to Tax Credits as COVID-19 Reaches Rural Areas

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Cash Management and Cost Containment Key as Pandemic Surges

By Bill Glazner

An uptick in COVID-19 cases in farm country has led farm owners to access federal tax credits and other coronavirus-related relief as the pandemic spreads to new areas in rural Kansas. For farmers who are seeing workers take sick leave due to coronavirus for the first time, it is important to remember that federal relief measures are available to you even if you have taken a loan under the Paycheck Protection Program (PPP) or the Economic Injury Disaster Loan (EIDL) program.

Specifically, immediate dollar-for-dollar tax credits are available to cover up to 80 hours of paid sick leave for workers who have tested positive for COVID-19 or who must quarantine because a family member is sick. The paid sick leave – and the offsetting tax credits – are mandated under the Families First Coronavirus Response Act, the first major federal response to the pandemic passed in March.

The offsetting tax credit comes in the form of a credit against the employer’s portion of payroll taxes. To take immediate advantage of the paid leave credits, businesses can retain and access funds that would otherwise be paid to the IRS in payroll taxes. If those amounts are not enough to cover the cost of paid leave, you can seek an expedited advance from the IRS.

Farmers Turn to Tax Credits

Until late June, most federal coronavirus-related benefits sought by farmers were programs that provided economic relief in response to loss of income due to the shutdown of restaurants, schools, and institutions as the nation tried to stem the spread of the virus.

But in recent weeks some Kansas farmers have turned to tax credits and other provisions of the Families First Act as workers have been diagnosed with the virus or have had to quarantine due to a family member or other contact being diagnosed.

COVID-19 diagnoses have spiked in Kansas – as in most other U.S. states – in recent weeks, with the illness spreading into rural areas. During the first week in June, Kansas’ positive test rate saw a seven-day rolling average of 3.6%. However, by the last week of June, the seven-day rolling average had spiked to 8.12%, according to data from the Kansas Department of Health and Environment.

What now?

We recommend that farmers consider the changes they may have to make as the COVID-19 resurgence continues. What if the illness hits your farm and your workforce is reduced? Have you taken safety measures – use of masks when working in close proximity to others, distancing your workers – that larger employers in the cities have been taking for the past several months?

Beyond those measures:

  • Make sure you are registered for the new farm program, the Coronavirus Food Assistance Program. There’s a lot of ambiguity in the rules so you may have questions about your eligibility. Please call us if you are uncertain.
  • Be conservative with your cash flow. It’s a guessing game right now with continued market volatility. When things start changing, you will need to make quick decisions that require updated cash flow strategies. If there’s ever been a time to manage your farm like a business, it’s now. Managing your farm by engaging in careful budgeting and forecasting is critical right now.
  • Consider low interest programs with distributors to buy fertilizer and seed if you choose to lock in prices now. If you have the cash, it might be a good time to prepay for those items. If you believe fuel is at a good price to lock in, using puts and calls might be a good strategy to lock in, without the upfront cash flow consumption.
  • Senate Republicans’ initial draft of the HEALS Act included $20 billion of additional funding to the USDA to supplement previous assistance for agricultural producers and processors for the impact of the pandemic.  While you can expect changes to the legislation before it’s signed into law, this provision is something to watch for. 

If you have questions about how to handle reductions in workforce due to COVID-19, or the economic relief that is available to you, please contact your Adams Brown advisor.