By Mark E. Battersby
The $1.9 trillion American Rescue Plan (ARP) includes lots of potential benefits for winter resorts, especially smaller ones. Here's a more detailed look at some of the key provisions that were originally included in the March 22 report on saminfo.com.
Funding, We’ve Got Funds
The State Small Business Credit Initiative (SSBCI) received $10 billion, with $2.5 billion set aside for businesses owned and controlled by socially and economically disadvantaged individuals, including minority-owned businesses. This will enable state governments to make low-interest loans and other investments to help their small business economies recover.
As with the original SSBCI, participating agencies and organizations were expected to leverage their SSBCI funds to generate new small business lending that is at least 10 times the amount of their SSBCI funds. The goal is to provide low-interest loans and venture capital to help entrepreneurs innovate, create and maintain jobs and provide the essential goods and services that communities depend on.
The funding is to be used to expand existing or create new state small-business investment programs, including state capital-access programs, collateral support programs, loan participation programs, loan guarantee programs, and venture capital programs.
The PPP Business Rescue
The Paycheck Protection Program (PPP) received an additional $7.25 billion in funding. If a business was operating for any 12-week (up from the previous 8-week) period between Feb. 15, 2019, and Feb. 15, 2020, it is eligible for a PPP loan.
In general, the loan terms are consistent with the first two rounds. While there have been some changes to the eligibility criteria, mountain resorts and touring centers are eligible to apply if they:
- previously received a PPP loan and will or have properly used the full amount;
- have no more than 300 employees (down from the first round’s up to 500 employees); and
- can demonstrate at least a 25 percent reduction in gross receipts in 2020 relative to 2019.
Seasonal businesses can average their employment over the full year to determine eligibility. For the record, seasonal employers and businesses are ones that don’t operate for more than seven months in any calendar year, or during the previous year had gross receipts for any six months that were not more than a third of the gross receipts for the other six months of that year.
As with earlier versions of the PPP, loans will be fully forgiven if at least 60 percent of the money is used to support payroll expenses with the remainder going to mortgage interest, rent, utilities, personal protective equipment or certain other business expenses. Loan payments will be deferred for six months and no collateral or personal guarantees are required. Nor will either the government or lenders charge small businesses any fees.
Businesses that receive PPP loans may have the loan forgiven if they meet certain criteria, including not laying off employees during an eight-week period covered by the loan. If they are not forgiven, the loans have a maturity of two years and carry an interest rate of 1 percent. And, while the PPP loan application process is slated to soon end, Congress is pressing for an extension because of the large amount of unexpended funds, giving operators until the end of May to apply.
Although a forgiven PPP loan is not taxable income for federal tax purposes and associated expenses are deductible, that may not be the case when it comes to state taxes. At least five states include loan forgiveness as income, with at least one state treating loan forgiveness as income for partnerships, S corporations, and sole proprietors—but not for corporations.
EIDL for More Rescue
The Economic Injury Disaster Loan (EIDL) program was created to provide economic relief to businesses that are currently experiencing a temporary loss of revenue due to the pandemic. The EIDL helps mountain resorts and other eligible businesses meet their financial obligations and operating expenses.
The ARP will provide $15 billion to the Emergency Injury Disaster Loan Program (EIDL) for long-term, low-interest loans to be made by the Small Business Administration (SBA). Severely impacted small businesses with fewer than 10 workers will reportedly be given priority for some of the funds.
Under the ARP, Targeted EIDL Advances for small businesses of up to $10,000 may be converted to grants if used to cover a business’s operating expenses. An interest rate of 3.75 percent is required for loans under $25,000; EIDL grants are exempt from federal tax.
Early in March 2021, the SBA announced that borrowers will have until 2022 to meet their obligations under the EIDL program. While interest will continue to accrue on the loan’s outstanding balance throughout the deferment, borrowers will resume their regular payment schedule before March 31, 2022.
Rescuing the Payroll
The ARP also contained a number of helpful tax credits to help some employers weather the continuing Covid-19 storm. For example, to encourage employers to keep workers on their payroll, even if they are not working during the covered period due to the effects of the Covid-19 outbreak, last year’s CARES Act created the Employee Retention Credit (ERC).
Under the new ARP, the ERC allows 70 percent (up from the earlier 50 percent) of a business’s qualified wages to be immediately refundable via reductions in the required employment tax deposits. The ARP also extended the increased ERC ceiling through the end of 2021.
For 2021, the definition of “large employer” changes from more than 100 to more than 500 employees, creating a broader definition of wages. Generally, a mountain resort or touring center business can count wages paid to both active (working) employees and those workers not currently providing services. What’s more, a business with fewer than 500 full-time equivalent employees is now allowed advance ERC payments during the quarter in which wages were paid to those employees—including seasonal employees, part-time employees, and employees not in existence in 2019.
Employer-Provided Sick Pay and Family Leave Pay
One of the first relief measures provided by our lawmakers to lessen the financial impact of the pandemic was the payroll tax credit for employers providing paid sick and family leave. There was also a similar credit for the self-employed.
The ARP extended the Family First Coronavirus Response Act (FFCRA) that originally required employers to provide sick pay and emergency family and medical leave pay through the third quarter of 2021. While the plan does not reinstate the mandatory paid family and sick leave, it allows employers who voluntarily choose to offer the benefit through Sept. 30, 2021 to claim the credit.
Payments voluntarily made to a qualified employee, subject to a maximum of $1,400 per week, are refundable dollar-for-dollar as a federal payroll tax credit by employers with fewer than 300 employees. The bill also increases the limit on applicable wages for which the credit can be claimed to $12,000, from $10,000, effective after March 31, 2021.
Furthermore, the plan eliminates FFCRA exemptions for employers with more than 500 employees or less than 50 employees. For self-employed individuals attempting to claim the credit, the number of days for which the credit can be claimed has been increased to 60 days (from 50 days), retroactive after Dec. 31, 2020.
Restaurant Revitalization Fund
The ARP appropriated $28.6 billion for a new Restaurant Revitalization Fund (RRF). The grant program provides a maximum amount to eligible restaurants of $10 million per eligible entity and any affiliated business ($5 million for each physical location). Establishments with less than $500,000 in gross receipts in 2019 can draw from a $5 billion set-aside.
RRF funds may be used to offset pandemic-related costs including payroll, rent or mortgage obligations, utilities, maintenance expenses (including construction to accommodate outdoor seating), food and beverage expenses, paid sick leave, covered supplier costs, and other expenses. The funds are available for food service operations where the primary purpose is serving food or drink. The program expires Dec. 31, 2021. And, like Targeted EIDL grants, these grants are excluded from income and will not result in denied deductions.
There are, of course, restrictions. Establishments ineligible include state and local government operated businesses, those that are owned or operated in 20 or more locations, those with a pending application or that have received a Shuttered Venues Operators Grant (SVOG), and publicly-traded businesses.
Since no rescue plan is complete without taxes, ARP includes a number of tax provisions, including the already-mentioned payroll tax credits for employers and changes related to retirement plan funding.
The ARC also ensures that Targeted Economic Injury Disaster Loans (EIDL) and Restaurant Revitalization Grants received from the SBA will not be subject to income tax. Nor will the exclusion result in the denial of a tax deduction, reduction of tax attributes, or denial of increases in the operation’s basis or book value.
To guide mountain resort owners, operators, or managers through this maze of new rules and benefits, the so-called Community Navigator Services has been funded to the tune of $100 million to provide outreach, education, and technical assistance with the SBA’s programs. Although Community Navigators, community organizations, or community financial institutions will provide invaluable services, professional guidance will be required to maximize the benefits a mountain resort or touring center may wish to explore.