Over the past few weeks, Congress has passed, and the President has signed, three pieces of legislation to address the medical and economic strains resulting from the Covid-19 (Coronavirus) pandemic. The first bill, signed March 3, provided $8.3 billion for health providers, disease testing and small-business loan subsidies. On March 18, a second relief package of about $100 billion went into effect that included tax credits for employers offering paid sick leave and increases to unemployment benefits and food assistance.
On March 27, President Trump signed the third phase of relief, the Coronavirus Aid, Relief, and Economic Security (CARES) Act following passage in the House and Senate. The CARES Act provides around $2 trillion in wide-reaching support measures including direct payments to citizens, loans and grants to small and medium businesses, and support for medical and first responders.
Several programs emerging from these last few weeks of rare bipartisan effort include the forest products industry. A number of them are listed below. Please note that application processes and guidelines for most of these programs are yet to be developed. We will work to keep you posted as more information becomes available.
- Disaster Assistance Loans – Now available – used for natural disasters in standard times, the Disaster Assistance provided by the Small Business Administration (SBA) allows for affordable financial help to businesses in declared disaster zones (of which all 50 states have been declared for Covid-19). This allows for economic injury loans of up to $2 million at a low rate. This program is currently available. More information on Disaster Assistance and how to apply is available here.
- Paycheck Protection Program (PPP) – coming soon – expands the emergency lending program housed in the Small Business Administration (SBA) 7(a) lending program. The PPP contains $349 billion in lending capacity available to businesses and qualifying entities with fewer than 500 employees and allows for federally insured, fully forgivable loans up to $10 milllion if all criteria are met. Details and application processes will be developed over the next week or so. More information the PPP is available here.
- Net Operating Losses (NOLs) — relaxes the limitations on a company’s use of losses from prior years. The Tax Cuts and Jobs Act had eliminated for most taxpayers the use of so-called net operating loss (NOL) carrybacks. The CARES Act would allow losses from 2018, 2019, or 2020 to be carried back five years. The provision also temporarily removes the taxable income limitation to allow an NOL to fully offset income. The goal of this language is to allow companies to utilize losses and amend prior years’ returns, which will provide critical cash flow and liquidity during the COVID-19 emergency.
- Deferred Social Security Tax Payment — allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. Employers generally are responsible for paying a 6.2% Social Security tax on employee wages. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
- Refundable Payroll Tax Credit — authorizes 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 (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) 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 greater 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.
- Corporate AMT Credits — 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.
- Business Interest Limitation — temporarily increases the amount of interest expense 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. As businesses look to weather the storm of the current crisis, this provision will allow them to increase liquidity with a reduced cost of capital, so that they are able to continue operations and keep employees on payroll.
- S-Corp and Pass Throughs — language modifies the limitation on losses for taxpayers other than corporations. The provision modifies the loss limitation applicable to pass-through businesses and sole proprietors, so they can utilize excess business losses and access critical cash flow to maintain operations and payroll for their employees.
You should consult with your accounting professional about the above tax provisions to ensure that you take full advantage of their benefits.
Forest Products Value Chain Measures
- Department of Transportation – Federal Highway Administration – Language was included 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 epidemic for the duration of the fiscal year.
- Department of Commerce–Manufacturing Extension Partnership (MEP) – $50 million will be distributed among the 51 MEP centers to help small- and medium-sized manufacturers recover from the economic impacts of coronavirus. The bill also waives the statutory cost-match requirements for all FY2020 funding.
- U.S. Forest Service – has been allocated for $3 million is included to re-establish scientific experiments impacted by travel restrictions, such as the Forest Inventory and Analysis program, which is a critical forest assessment tool for states.
Please visit our website at www.hardwoodfederation.com for a (updated as needed) list of Covid-19 Relief information and links. The U.S. Chamber of Commerce has an excellent guide to Coronavirus relief programs for small businesses, available here.
States of Emergency
On March 13, Trump declared a national emergency under the 1988 Stafford Disaster Relief and Emergency Assistance Act. Under the Stafford Act, about $40 billion from the Federal Emergency Management Agency can be used by the federal government to fight the coronavirus pandemic. This includes direct financial assistance to states and waiving certain federal regulations on health care providers so they can more quickly deploy medical aid.
A number of state Governors have also declared emergencies and have enacted various restrictions on residents and businesses under their jurisdiction, including stay at home orders and limiting business operations to those considered “essential.”
The U.S. Department of Homeland Security has issued guidance defining essential and critical workforce during this crisis. The guidance includes the forest products industry workforce as essential under the Food and Agriculture tab. (See more below) However, states are not required to follow this guidance and may choose to define essential workforce more strictly…or more leniently.
States are issuing and amending orders at rapid pace, sometimes multiple times in one day. It is essential that you consult your state government officials to ensure that your businesses are being operated within state parameters. Your local and state trade associations are also excellent sources of information.
The Council of State Governments has compiled a website with links to all state Executive Orders and Emergency declarations. It is also a wealth of information. You may access the site HERE.
Critical Workforce Infrastructure Designation
As mentioned above, we know many states around the country have imposed shelter in place orders and restrictions on which businesses may and may not continue to remain open during the COVID crisis. To provide direction to state and local officials, the Department of Homeland Security has issued an “Essential Critical Infrastructure Workforce” advisory list. This guidance, which has just been updated, is intended to help State, local, tribal and territorial officials as they work to protect their communities while ensuring continuity of functions critical to public health and safety, as well as economic and national security.
Several provisions in the latest guidance, which was issued on March 28, include our sector as critical infrastructure workforce. These include:
- Workers who support sawmills and the manufacture and distribution of fiber and forest products, including, but not limited to timber, paper, and other wood and fiber products
- Workers supporting the energy sector through renewable energy infrastructure (including, but not limited to wind, solar, biomass, hydrogen, ocean, geothermal, and/or hydroelectric), including those supporting construction, manufacturing, transportation, permitting, operation/maintenance, monitoring, and logistics. (Note: Our take here is that mills generating sawmill residuals that are then converted to pellets for home heating and power generation are supporting the biomass renewable energy space.)
- Workers who support the supply chain of building materials from production through application/installation, including cabinetry, fixtures, doors, cement, hardware, plumbing, electrical, heating/cooling, refrigeration, appliances, paint/coatings, and employees who provide services that enable repair materials and equipment for essential functions.
- Workers supporting the construction of housing, including those supporting government functions related to the building and development process, such as inspections, permitting and plan review services that can be modified to protect the public health, but fundamentally should continue and serve the construction of housing (e.g., allow qualified private third-party inspections in case of government shutdown).
The Hardwood Federation team is staying close to this situation and will keep you regularly apprised of new developments.
Land and Water Conservation Fund – Congress Poised to Pass Most Significant Legislation in Decades
A bipartisan effort could lead to the most significant conservation legislation in 50 years with the Land and Water Conservation Fund. Two separate bills, S. 1081 and S. 500, would provide permanent funding at a level of $900 million annually for the LWCF and would take unallocated oil and gas revenues to create a five-year (up-to) $9.5 billion trust fund to chip away at the deferred maintenance in national parks.
This legislation has been held up, along with everything else, due to current nationwide virus concerns, but could move quickly when regular order is restored. It was declared a “high priority” for Senate leadership and the White House.
Trade Update – Canada Ratifies USMCA
On Friday, March 13 the US-Mexico-Canada Agreement (USMCA) was officially ratified by both the Canadian House of Commons and the Canadian Senate, joining the US and Mexico in effectively implementing the agreement. Each country must still “prepare uniform regulations for certain new provisions in the agreement” before it can be completely entered into. President Trump had pushed for implementation by June 1, 2020, but this will likely be delayed due to the effects of the coronavirus, especially with the closures of borders between the US and both Mexico and Canada to non-essential travel.
Happening in the Hardwood World
Positive News from Furniture Today Podcast
Thanks to our friends at AHMI for sending this out, but if you missed it, please check out this podcast episode from Furniture Today. Furniture Today editor Bill McLaughlin speaks with Jonathan Bass, owner of PTM Images regarding the hope that furniture manufacturing could pivot from a predominant Asian supply back to North America. PTM Images manufactures décor, mirrors and frames in California and Mexico. Read more about it here.