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good morning everyone welcome to the breakout session for the agribusiness management track before i introduce today's speaker i'd like to mention that we will be offering one ceu in professional development for attending this breakout session we have the details at the end of this session offering that ceu and how to access your credit we appreciate the opportunity to partner with the ccas to offer this additional benefit during the programming right now i'm happy to introduce christine tigrin presenting a 2021 tax update what we know and what we don't know tigran is an adjunct professor at the agricultural education and studies department at the iowa state university she worked in the center for agricultural law and taxation where she focuses on studying and interpreting the laws impacting the ag industry christine focuses on ag taxation specifically and before coming to isu she worked for a legal publishing company as a practicing attorney she received her jd from the university of texas at austin and her bachelor's from in journalism from iowa state she grew up on a farm in west central illinois and now i'd like to introduce christine thank you jesse and thanks for having me here today i just am really glad to be able to talk to you about a topic that i'm kind of passionate about and that's taxation agricultural taxation the impact of these uh new laws the impact of these items on your farming business and so today we have great opportunity to have a conversation so just because we're remote doesn't mean that we don't want you to ask questions and make this an interactive presentation so what i'm covering is what i've been getting the most questions about over the past couple of months but if there are items that you're curious about you'd like more information about just jump in the question box type in your question and jesse will be able to bring those to us so we can talk about the things that most matter to you so 2021 has uh started off um much the same way i think that 2020 ended with some uncertainty as to the future with a lot of new programs being rolled out to try to compensate small businesses for losses suffered because of the coven pandemic and we've just had a lot of change and so the first part of this presentation i just want to review a couple of the big things that have really impacted a lot of farmers out there and i'm sure many of you have been working with your lenders have been working with your tax advisors to try to figure out exactly how these laws apply to you and your business and so i'm just going to review ppp to start with the paycheck protection program answer some common questions that have been coming up and just kind of discuss that a little bit with you look at the changes that were made with respect to idol advances the tax changes how all this will impact your tax return that your busy working on with your advisor as well we also want to talk about the employee retention credit which is a really big new benefit i say new because in many cases people were not eligible for it in 2020 because they had paycheck protection program loans and the rules back then the law said you couldn't have both but the new law has changed that so there are now lots of small businesses that are eligible to go back and take advantage of the employee retention credit as well then i also just want to make sure that you're all aware that if anyone had issues where they had employees or as a self-employed person they themselves had to take periods of leave from being able to work because of coveted related reasons even if they had to take time off from their business to be with children who were being schooled online there's new tax credit available for that as well and you'll be taking that on your 2020 return and if you have need to accumulate that leave in 2021 you'll be taking that leave on your 2021 return so there's lots of other items that were passed in this new legislation that went into place at the end of 2020 we're not going to talk about those many of you received a stimulus check in the mail again in 2021 that was another part of this new law there are new net operating loss rules for farmers we're not going to dive into that just lots and lots of law that went into place at the end of 2020 and as you know there is negotiation going on right now for another roughly the proposal would be for 1.9 trillion dollars of covet relief so we don't know yet what's around the corner what we do know is that the vote in the house probably won't take place because right now um the the items that the items that the committees are discussing are just sort of being rolled out so the first vote in the house probably won't take place until the week of february 22nd so now it's kind of a time to keep watch over what's around the corner um with the new relief that's being rolled out as well and so with that said i'm going to launch in and tell you that at iowa state at our center for agricultural law and taxation we really do like to keep up with you out there in the industry those of you with the boots on the ground um the farmers in the field the advisors that that provide advice to you all um and and one of the primary ways we do that is through a website and i you'll have access to these slides so you can go back and and look at anything um in more detail because some of them we won't cover in detail um i want to make sure that we maximize the time we have today to talk about the things that are most important but i did put the web address to our website out right here um we have a lot of articles we have a lot of resources that it's just perhaps will be of use to you throughout the year and as new legislation for example gets passed we would just invite you to come out and and read about it or reach out to us if if you have questions so let's talk about first oh jeff jesse yeah i wanted to jump in uh we had a question come in and before we got too far off of our topic um our first slide there the question is will the federal government be sending a 1099 or some sort of mechanism of reporting the stimulus payments made and does that go somewhere on our 1040s uh the stimulus we might have to clarify since there are so many different stimulus packages uh maybe talk a little bit about that economic impact payment versus the ppp um and erc stimulus pieces sure that's a great question i mean what a confusing year right with money coming from different sources and trying to keep track of it all so it's been interesting with the stimulus payments what most people usually are talking about and i'm assuming you're talking about the economic impact payments which were those payments that were sent out roughly to most americans right they started to phase out with joint with married filing jointly if if the income was 150 and above um 150 000 and above but otherwise um a big chunk of americans got 1200 each 500 per children the first round of course was issued last uh last may they started uh rolling out then and then another second round um started coming out in 2021 and in 2020 as soon as that payment was made there was also a letter that came in the mail and it was signed by the president so that might remind you it was a letter that summarized what the payment was that you received and that had an irs notice number on it it was actually a formal irs notice which was the only notification that we will receive in the mail regarding those stimulus payments the economic impact payments you won't receive a 1099 it's not taxable income it's it was an advance on a tax credit so yes your tax professional is going to need to know how much you received from the government for those stimulus payments and if you have that letter you're supposed to bring that to your tax appointment now the interesting thing is for the 2021 payments there was also supposed to be a similar letter i haven't heard from anyone who's received that letter so there is no corresponding letter in a lot of cases any form for you to bring to your tax appointment now what irs has recently done is opened up an online portal where the taxpayer can go out set up an account and pull up the amount of the payment that they received so if you don't have a record a bank deposit record or something then you work with your tax provider to see what exactly they need because what happens is the amount of the payment that you received will go on your 2020 return even the money that was received in 2021 is going to be on your 2020 return not as taxable income doesn't impact your tax situation at all it was truly free money but it has to be reconciled because some people in 2020 or early 2021 didn't actually receive the full amount to which they were entitled and that would have come about for example if you had a baby in 2020 irs didn't know that you had a new baby and so they sent you a check based upon your 2019 income so if your situation changed and now you had a dependent then you know you did not receive the 500 initial payment that you would have received in 2020 when you file your 2020 return you get to claim that so you'll get additional money you also may have for example a college student who was your dependent in 2019 and you didn't get any money for them this year because they were not un under 17 so they were not eligible for the child payment so nobody got any money but in 2020 maybe they got their first job they became independent they're no longer a dependent on your return in that particular case when you file your 2020 return if they file as a as an independent taxpayer they'll get their stimulus payments when they file the return so you'll make those uh young folks who are just starting out very happy so hopefully that addressed your question it was kind of a long answer but it is important because it does go on your return but don't worry it won't hurt you because the other one thing i want to make sure you understand is the way the law was written was really one of those very few heads you win tails you win laws it never works this way but this law did and it said okay we're going to use your 2019 return if we have it otherwise sometimes they use 2018 but if we gave you too much money let's say that in 2019 you had a child under 17 but in 2020 they turned 17 and you would really no longer be eligible for the 500 well guess what when your tax return preparer calculates the amount of uh of credit that you're entitled to they'll realize that you were overpaid but the law specifically says you do not have to pay that back so a lot of a lot of people got more than what they were technically entitled to under 2020 uh tax rules but they don't have to pay it back and then some people that didn't get all the amount that they were entitled to they'll get to claim it when they file the return so it's not going to be bad but there's a great question about if you have a letter bring it to your tax professional otherwise they'll probably have to work with you to get you on that portal to get that that information up all right let's move on into ppp because a lot of small businesses have really um been able to tap into some sources of money that the government has made available through this paycheck protection program it was really the primary vehicle that was authorized through the cares act to get money in the hands of small businesses that were really struggling because of coronavirus and so you see here the initial program as you know um ended august 8th and at that time 525 billion dollars of loans had been made through the program and there was still also money left on the table um because by that point that the period ended and congress said no more loans even though there was still 133 billion dollars left what happened in december when congress came out and and reauthorized the program is they allocated 284 billion dollars for the new ppp program and it really has three components right the ppp now and i'm just going to say ppp it's a little easier than paycheck protection program but it authorized new for straw loans so if you're someone who did not take advantage of ppp in 2020 then you were suddenly eligible for a new loan for the first time so it's called a first draw loan if you got a first draw loan in 2020 so if if you were a farmer who received a first draw loan in 2020 but your loan amount was very small because your net schedule f income was very low the new law gives us a new calculation for self-employed farmers that allows you to now receive an increase to that original loan so it's not going to be a new loan it's going to be an increase to your original loan then the third prong of this new reauthorized extended ppp program is what we call second draw loans which is a whole new loan that you get and it's very much like the first loan so let's say you got a 20 833 dollar loan in 2020 if you can show that your gross receipts declined by 25 or more in 2020 as compared to 2019 and it's really only one quarter we'll talk about this a little bit as we go along then you're eligible for another twenty thousand eight hundred thirty three dollar loan and and when i say loan right we're talking about loans but most of you are aware the ppp program is a forgivable loan what does that mean well it's it's issued through your bank it's issued through your lender but you get the money you spend it in the way that you're entitled to spend it and in the case of a self-employed farmer the way you're entitled to spend it is owner compensation meaning that you get to actually have that money as income to yourself kind of like a paycheck for the self-employed and you get to have that money and it will be forgiven which means you don't pay it back and because of the new laws we have it won't be taxed and it won't impact the deductions that you are eligible to take on your tax return so it really is in this case free money to be used by small businesses who are facing uncertainty because of covid and so let's just quickly review the details of this and answer questions that you might have with respect to these this program so the first straw ppp loan is for those who did not receive a loan in 2020 so some of you may have been left out because your schedule f income your net income that we were required to use in 2020 it might have been zero it might have been a negative and and now the law steps in and says oh we have a new calculation for farmers if you didn't qualify in 2020 you get to have a loan in 2021 based on the old rules which really the the big thing is the maximum amount is 10 million dollars and then the thing is you don't have to show a decline in gross receipts if it's your first draw loan so if you didn't receive a loan in 2020 and you're eligible in 2021 you don't have to do a gross receipts calculation and say that they decline by 25 or more it's irrelevant you qualify based upon your nut schedule f income and your affirmation that economic uncertainty makes the loan necessary we'll talk about that in a minute so what is this amount that we get as a paycheck protection program loan well the amount you get is based upon what the law calls payroll costs and so of course if you have employees it's based upon what you pay your employees as wages but the law also says if you're self-employed you should be able to have some compensation for yourself and so the way that they have come up with allowing us to get this compensation is by looking at our tax return so for this new first straw loan program you get to look at either 2019 or 2020 if you have it prepared or drafted out um if you're a farmer you look at your schedule f and you get to look at line nine your gross income now you take that amount and you're going to have to take away any any payroll costs from that amount because we don't want to double dip but then you add back in any of your payroll costs and then you divide that by 12 and you multiply it by 2.5 to get two and a half months average pay for it for that is the amount that you're going to get for your loan so let's look at an example um in just a minute after we talk about one other key uh term that's really important to understand when we talk about ppp and that's covered period so as soon as your loan is disbursed as soon as the bank gives you your money you hav an 8 to 24 week covered period within which to spend those proceeds now if you have employees it means that you'll pay your employees their salaries you can there's other non-payroll expenses that you can actually use as well as long as you don't exceed 40 percent you'll get full forgiveness on those non-payroll expenses but for self-employed people there's really nothing to do except take your owner compensation so if you get the twenty thousand eight hundred thirty three dollars in owner compensation that is your paycheck so to speak and so really the technical best way to do this is to write yourself a check and bingo you've spent the money the way it's intended to be spent and you should be eligible for full forgiveness for that so there's a new application that's out there one thing i want to point out is the certifications that do have to be made on that application and one that that we have to affirm is that the current economic uncertainty makes this loan request necessary to support the ongoing operation of the applicant so when you apply for ppp you are certifying that the economic uncertainty makes the loan requests necessary so necessity matters it's it's a kind of an ambiguous affirmation that we're making and we do have some safe harbors out there that have been put in place that say really um if your loan is less than two million dollars you're going to have been deemed to have made this in good faith but if you're somebody that is rolling in the money um you know not common these days but if that's the case you just do need to think about that necessity determination because you could be audited after the fact and that an audit that would somehow find that you had not made that certification in good faith would re require you to pay that money back so let's look at our line nine on our schedule f which is the line that we use now to determine um our gross income which is that amount we get to divide by 12 and multiply by 2.5 to get our owner compensation replacement and so there's the line nine and that's how that that's the important line it's gross income right that's that's before all of your expenses so we do have to lower it to a hundred thousand dollars so you don't get to exceed that for any owner compensation but we'll look at an example in just a minute about how that works and this new farmer rule right last year you had to look at line 34 which was the net line after you took away all your expenses so a lot of folks had low net align 34s a lot of folks had zero or some had negative because of the way that we handled depreciation right you you trade equipment now your income from that trade goes on a different form 47.97 you pay tax on that but the offsetting depreciation goes on your schedule up so your schedule f income is is drawn down so that was a little bit of a handicap to those who were seeking a ppp loan and congress listened and said okay for farmers we're going to do it different in 2021 and we're going to allow people to use their gross income and you can use that new calculation for three things you if you didn't get a loan in 2020 you can get one now if you and you don't have to show um a decline in course receipts if it's your first time if you did get a loan in 2020 but it wasn't very much you can now use that line 9 to get an increase and then finally if you did get a loan in 2020 and you have a 25 or more decline in gross receipts for any quarter in 2020 as compared to 2019 you can get a whole another ppp loan and so we this new farmer rule who's it available to was available to sole proprietorships independent contractors self-employed individuals it doesn't apply to partnerships it doesn't apply to c-corps it doesn't apply to s-corps so even though some of those entities will use a schedule f there's nothing in the rules that allows us to use this special rule those entities have their own calculation rules so we we have to look at line nine we have to cap it at a hundred thousand you can't exceed that but then you divide by 12 and multiply by 2.5 so let's look at an example so let's say this is what my 2019 schedule f looked like so when i went to to talk to my professionals my lender last year because i wanted to get a ppp loan they looked at my line 34 schedule f and they said well you have negative 6 500 you do not qualify for a ppp loan so i went home right well this year now we look at line nine instead and on my schedule left my gross income was a hundred thirty thousand dollars so i now do uh i am now eligible and you can see on the schedule f that this particular farmer had had employees so i'm also going to look at line 22 i paid 20 000 in labor and i'm going to look at 23 which is my pension and profit sharing plan for my employees and there's another line line 15 which doesn't have anything in this particular schedule f but that's another line with benefits that i would also get to look at and so how does all this look when i'm trying to figure out what loan i'd be entitled to well i would i would now take my hundred thirty thousand dollars i'd subtract out those employee costs i talked about i'm still over a hundred thousand so i would have to lower that to a hundred thousand and then i get to add in my payroll costs back so i take that hundred twenty one thousand five hundred dollars in this example divided by twelve multiply it by two point five and i'm eligible for twenty five thousand dollar loan twenty thousand eight hundred thirty three of that is my owner compensation now let's look at how an increase works right so this is where in 2020 my schedule f looked like this so i actually had a line 34 net income in this case it was 15 000 and so i said well what the heck it's a small amount but i might as well get a loan um get it forgiven get the money that's available because i am facing economic uncertainty so this particular farmer went ahead and you know would have gotten the loan in 2020 and based upon this schedule f and you can see on line nine this schedule f had gross income of 130 000 but the net was only 15 000. so in this particular example the loan in 2020 the first straw loan that this farmer got was three thousand one hundred twenty-five dollars not very significant the new law says okay you can go back go back to your lender show them your schedule f and you see that you have that hundred thousand dollars sitting there so you can get the difference between what you would have gotten um the twenty thousand eight hundred and thirty three dollars and the three thousand one hundred and twenty five dollars so in this case this farmer is eligible for a seventeen thousand seven hundred and eight dollar increase now that's not a new loan that's just an increase to the loan they got in 2020 straightforward process go to the lender the lender request the increase the money's there and it's just in this example going to be additional owner compensation for the farmer okay jump in i have a i have another question out here it involves this increase on the first round draw so if one applies for an increase in a first round draw loan does it start a new 8 to 24 week covered period or does the covered period remain the same as the original or the first draw that is a great question and i just have to say at the outset that the guidance has not answered that question very clearly what in fact it hasn't really answered that question so it does seem as though lenders our lenders in iowa and i think a lot of the lenders in illinois are looking at this differently than getting a first straw loan in 2021 and they're looking at it as though it's going backwards to that initial loan so you're not starting a whole new covered period now we could get guidance tomorrow that says something different but what it appears is that it is just going to be money that you are not subject to that full eight week covered period once you get it that's what it seems and i know the sba office in iowa put out an announcement last friday that said as much that that's how they're interpreting it and so it doesn't restrict farmers from then qualifying for a second draw loan what they're suggesting is that the the increase is dispersed and spent and then they're saying that farmers are eligible for a second draw loan uh right away after that but again we haven't heard that from the national office that's been the difficulty about this program is that not all of the really important questions have been answered but the deadline i don't think i've even said that at this point the deadline for when this all ends is march 31st so we don't have a lot of time so we really have to sort of move forward with what we know so worst case scenario we apply for the increase we apply for the second draw alone we get both you know if something were to come out later that says you're not eligible for forgiveness it would seem like only one of those would be taken away for forgiveness and then it would be a loan that you would have to pay back but i don't expect that to happen but i'm just kind of kind of giving you full disclosure in terms of where there are gray areas we have to just act with caution so when we talk about a second draw loan this is only applicable to those people who actually received a first straw loan and most the time that's the first straw alone in 2020 so i got my ppp last july um and then the one thing too about the the increase i didn't i didn't it's in the slides but i don't think i said it because it's super important you're not eligible for an increase if your first loan was already forgiven that's in the rules that's why i made a sad face on that slide seems like one of those unfair rules um but it's only available if that loan is still kind of open um but moving on to second draw loans these loans are available to businesses that can show that they had a revenue reduction of 25 or more in 2020 as compared to 2019 and there are two ways to show this you can show it for only one quarter so technically you could actually have more income in 2020 than 2019 but if you had one quarter where you had that gross uh that the gross receipts were 25 or more uh decline as compared to 2019 then you're eligible it's like a it's like a box that has to be checked and once the box is checked you're in and if you can't check the box you're out the other way you can uh be eligible is if you just want to use your tax return you can have work with your preparer you don't have to present it now but you do have to present the final return at the time that you get forgiveness but you can use your 2020 return and if you can show that you're 20 20 gross income and you have to add back in cost of goods sold if you can show that that is 25 or more less than 2019 then you can also check that box and be eligible for the second draw loan otherwise really the only difference in the second draw loan is there's a few requirements that don't apply to a lot of farmers like you can only have 300 or a few fewer employees instead of 500 or fewer employees and you can only have a maximum of 2 million dollars as opposed to 10 million dollars but for most of us the second draw is going to work exactly the same so schedule f of someone who got the loan back in um in july their first straw loan doesn't matter if it's forgiven or not the only thing is you have to have paid the money in the way it was intended to be paid um so it can be forgiven it can be not forgiven that part doesn't matter um but using this schedule f now assuming you have that 25 reduction you would be eligible for a twenty thousand eight hundred thirty three dollar loan um this is above and on top of the ppp loan that you received in 2020 so that's how the second draw works um forgiveness it's really important that we spend these proceeds the way they're allowed to be spent right so we have payroll costs so if you're self-employed with no employees it's a piece of cake because your only money that you're receiving is for owner compensation you just write yourself a check and that's it if you have employees then you get to pay your employees with the money as well but the law also says even though the ppp was based upon payroll costs you can you can spend up to 40 percent of it on non-payroll costs and there's six eligible categories we're not going to go through those today um but but you know you're probably familiar with them or check with your advisor about them rents mortgage interests some new categories like um ppe um input costs and things like that um you you have to spend those on eligible expenses and if you do that's when we say forgiveness what does forgiveness means it means the loan is no longer on your books and you don't owe it back you don't have to pay it back and it doesn't hit your tax return it's it's really phenomenal now the key thing for forgiveness what the rules say is we have an eight week to a 24 week forgiveness period and it does say in the forgiveness guidance that was issued january 19th that the owner compensation and payroll costs are prorated based upon your chosen coverage period so what does that mean well if i'm looking at owner compensation then i want to get to that magic twenty thousand eight hundred thirty three dollars if i had at least a hundred thousand dollars of gross income on my schedule f to get there i really have to have and i said on this slide 10.5 i think it's technically 10.7 week covered period because you have to do the math to figure out how you get there um based upon the hundred thousand and so a 10.7 roughly 11 week coverage period would be required according to the guidance that came out to get you that full forgiveness of that owner compensation your payroll costs are also prorated so if you're paying an employer employee how much you can pay them is going to depend on how long your coverage period is so let's just talk about a couple of questions with the caveat that some of these are not known for sure these are just what we have the guidance for um our best determination based upon the guidance that's been given the first question is can you get a first straw loan in 2020 and a second draw loan in 2020 21 and the answer is yes that's what the second draw loan is for as long as you can show that you had a 25 decline in gross receipts so yes that's what it means to have first draw second draw you received the ppp in 2020 now you're eligible for a whole nother loan in 2021 and you could get up to the the the 20 833 for each one as a self-employed farmer but for the second one you have to show the 25 percent or more decline in gross receipts must you have received forgiveness for your first straw loan to get your second draw loan and the answer is no no you just have to have spent it on eligible expenses prior to dispersing the second draw loan um here's kind of the dicey one may i receive both a first straw loan and a second draw loan in 2021 and here's kind of a gray area that some lenders are allowing this but when you look at the forgiveness guidance it seems like there is a timing problem because the guidance says you have to have at least an eight week coverage period it says covered period it says that your covered period for your first draw loan cannot overlap with the covered period for the second draw loan so it would seem like if i get my first straw loan today i would start my covered period for my first draw loan it would have to go at least eight weeks and that would have to be ended before i could qualify for a new covered period but i think some lenders have been giving first draw second draw loans back to back but i think the forgiveness guidance says you have to have an eight-week covered period for each one and they cannot overlap so that's my concern with that what about an increase in 2021 and a second draw in 2021 and this we kind of talked about somebody already asked this question and this one we don't have the guidance that that's restricts this there's nothing that says right now that the increase starts a new covered period so we don't have clear guidance that you can do it but again like i said i know that the sba office in iowa just said on friday that you can um so work with your lender on that and work within whatever you're comfortable with some people are more comfortable with gray areas than others um what about some other common questions can a partnership use the farmer rule we've had that question a lot and the guidance does not allow you to to do that when i say the farmer rule i mean can you look at your gross schedule f income of your partnership um because that would be a lot better for partnerships too right um but the rules for partnerships have a special calculation for partner compensation and that is based on the net income passed through on the k1 jesse did you have a question did something pop up that somebody wanted to ask about yes i do and you're actually talking about this exact point the question is if i started a farm business llc in 2020 and did not apply for the ppp what would the application in 2021 under the new rules look like now this llc appears that it would be filing as a schedule c and not as a schedule f oh that's a big distinction um so you have to look at the rules that deal with new businesses to be able to determine your eligibility and we don't have time to go into all the details of that because the rules have special month uh calculations and things like that with respect to the gross receipts um if if if it's a new one you'd be looking at the first draw alone but you still have to follow those rules but with respect to the llc itself what the rules say is if you are an llc you will calculate your loan based upon the tax treatment of the llc so if i'm a single member llc under the tax law i'm disregarded i'm the same as a sole proprietor and i would be able to use if i was a farmer my schedule f and i would be able to use the new pharma rule i'd be able to use line nine of the gross income now in your question in your example it looks like the llc is not as farming business it's non-farming so it's a schedule c same thing it's you can use the schedule c you would use uh line 31 the net income on line 31 only farmers get the special gross income rule and it was really driven by the fact that farmers are the ones who are always trading in that large equipment they're always having that huge influx of 47 97 income that's offset by that huge amount of depreciation section 179 bonus on the schedule f so the idea is a farmer's schedule f is going to misrepresent the actual income the farmer has whereas a schedule c is usually more indicative of the actual income that the schedule c owner receives so if i'm an llc that's single member schedule c i'll use line 34. if i'm a single member farmer i get a used line nine on my schedule f if i'm an llc partnership then i have to use the partner rules the partnership rules which means i get to count my payroll that i pay to all my employees but partners are not employees so what i use for partner compensation is going to be the net self-employment income that i've passed through to them on the k1 um and so i get to add that on top of my other payroll costs same rule divide by 12 multiply by 2.5 because it's going to be two and a half months worth of the co of the eligibility and then there's a unique situation that arises uh with husband wife's um husbands and wives under irs rules you you realize that you can you you can have a farming partnership where you're both essentially partners in the farming business and irs for simplicity's sake says okay in that situation you don't have to file a partnership tax return instead you get to each file your own schedule f and you're a joint venture and so what it appears is that the rules would allow even though we don't have guidance on this it would seem that if you have that situation that each spouse should be able to use their own schedule f to apply for the loan because if they were in a partnership each of them would have their own partnership income and it would not be fair to somehow dock them so um it would seem that both uh schedule f's would count in that particular situation so how's the money coming i had to turn these slides in last week so i don't have the updated updated numbers over the weekend um but it does not appear that the money is running out at a rapid pace so you know work with your lenders work with your advisors if you qualify make sure that um you uh get in the door and get yourself in line um just one thing to remember right all this just like all other government payments it's public so there's databases when people googled your name they would find your name in business and they would find how much money you received from the ppp so just keep that in mind now a biggie that was brought to us by the consolidated appropriations act that has made everything so much nicer is the cares act from the beginning said that forgiven ppp loans were were exempt from your income meant that you didn't have to put them on your tax return that's what we want right but irs had stepped in with some um frustrating rules that said because this was exempt money tax-free money you were not going to be eligible to deduct the expenses associated with the proceeds that you received so if i used my pp loan ppp loan to pay my employees i wouldn't be able to deduct those employee expenses well congress listened again and said okay we don't want it that way we want it to be tax free and we want our businesses to be able to deduct the expenses so they change the law and so now our ppp expenses are deductible just as they normally would be just as if you paid for them out of your regular um business account and and it also means that if i'm in in a pass-through entity if i'm in a partnership or an s corporation that my basis gets to increase at the time that the loan forgiveness happens it's not going to be denied to me it's treated just as any other tax-exempt money would be treated so that you know there might be some issues where you cross a year where you might have some loss issues but work that out with your tax advisor um it's really great news and the other thing that happened is some people received idle advances right you economic injury disaster loans were made available to farmers for the first time and part of that program was we're also going to allow you if you apply for an idle loan we're going to throw this new benefit in that's going to give you up to ten thousand dollars of in advance the advance was just a grant so you'll hear it called an idle advance or you'll hear it called an idle grant that many of you probably received this where it was a thousand dollars per employee up to ten thousand dollars so it might have been a small amount but originally this amount was supposed to reduce your forgiveness of your ppp loan that rule got thrown out so if you applied for forgiveness your forgiveness was reduced by an idle advance you're going to get that money back from your lender because the sba is remitting those funds to the lenders and then the other really great thing about the law was these idol grants were not tax-free when they were initially implemented but the new law changed that so if you received a one thousand three thousand five thousand ten thousand dollar idle advance or idle grant that money is tax-free as well what does that mean you don't get a 10.99 you don't put it on your tax return it does not impact your deductions it is truly free money and it's really a very helpful nice thing so that's ppp we don't have a lot of time so i'm going to move on i'm going to trust that jesse will interrupt me if there are big questions out there i want to be able to actually i have three okay uh so we have a question coming in that says my husband and i both have an llc uh minus four hour farm and his is a livestock feed business we file our taxes jointly we did not apply or file a ppp loan because he doesn't take a salary and i pay him a very small amount of salary from the farm and she does not take a salary would we be eligible to go back for a first loan so from the sounds of it and i can't i can't see your uh your schedule f or your schedule c but yes you would be um based upon what you've said and you have to go uh check with your lender um or a tax advisor is a great person to check with initially somebody who understands the tax returns um but the key thing is each person who operates a business there is a max of that 20 833 across all lines of businesses and there are also affiliation rules that apply as well so you can work with your advisor about that but i would definitely go check that out and see what what your best option is at this point okay next question i see here is where do i start in this whole ppp process yeah that's a great question as well and the the people who are getting you the money through the ppp are your lenders um so the lender is where you go you would typically go you can go to any lender that you want you can go to your regular lender and if they scratch their head and go ppp weight then find a new lender but most lenders most agricultural lenders are very engaged in this already and they absolutely know what they're doing but the key is you would likely need to involve your tax professional as well because you're going to need your tax return information and they also are very much a huge part of this process so your tax professional is key to this in terms of helping to explain to you what you'd be eligible for helping um figure out how your application would work and getting you the documents that you need to be able to um prove your payroll prove your uh owner compensation amount that you're entitled to etc all right christine the last one that i have right now is kind of a big one so this one says what is your opinion on the biden tax proposal as it pertains to estate taxes and capital gains on agriculture so that's a great question and um you know since we don't have tons of time i i have a slide here and i'm actually going to roll ahead to it we can talk about the employee retention credit as time allows but review your slides um if if you need information about that and if i have time i'll go back and talk about the other things but let's roll ahead because this really is important information that i really want to talk about with you all today because i know it's kind of top of mind and i know that there have been a lot of articles written out there in the farm press um talking about certain ideas that um the biden tax proposal is and and so the first thing i just want to clarify is that we have actually very limited information about what biden's tax proposals will be um and and and i know we can read articles that make it sound like it's all like in some detailed white paper somewhere but there is no such white paper um i did write an article on our website back in october um that went through the public information that we had then as far as what biden has proposed um and it was very sketchy he had some information on his campaign website but it's typical political talk where it's very general um so it'll say things like we're going to deal with capital gains unfairness for example didn't lay it out clearly a lot of the information that was written last fall about it was written by reporters who had had detailed discussions with his campaign staffers and we're writing things about that so you get to the heart of sort of his ideas but we don't have any details that have actually been proposed we have no draft legislation that's been proposed we have none of that so couple things i want to talk about with respect to this oopsies i think i went the other way all right first of all what do i expect this year and you ask my opinion well what i'll give you is my thoughts and projections in terms of what i think is going to possibly be happening over the next couple of years and then where some of the sort of danger areas might be for some particular um farmers and so first of all i think all eyes right now are on coveted relief and so as you know that's congress has got this impeachment thing going but then they're also at the same time working on stringing together a 1.7 1.9 trillion dollar covet relief package it will likely get taken smaller but maybe not maybe it could be taken larger you never know where that could end up um lots and lots of money in that that would increase child tax credits from proposals that are on the table it would um put out a whole nother round of these economic impact payments the stimulus payments i mean just lots and lots of money that's going to have to be paid for somehow the cares act is going to have to be paid for somehow the consolidated appropriations act is going to have to be paid for somehow so some of the short-term uh projected changes that we could see even this year might be to unwind some of the tax cuts and jobs act programs that were put in place um at the end of 2017 for the 2018 tax year those didn't impact a lot of people um maybe in the farming audience but it would change some of the no the net operating loss rules business loss limitation rules that type of thing but what about down the road so here's where the money money um here's where here's where we're all concerned right and here's where we have no detail because all these things have been proposed but nothing with uh detail and some of them are mutually exclusive right so one of the big things that he has said that he would like to do is to have a capital gain rate increase what would that mean it would mean that capital gain would be taxed at ordinary income tax rates now remember anything he proposes has to get through at this point a senate that is evenly split with the only deciding vote being vice president harris so we have some democrats like senator joe manchin is kind of the key one from west virginia who kind of thinks in a lot of ways like a typical republican and so anything they they've made it so that they'll be able to get things through with a 51 vote even though typically you'd have to have 60 votes but they've changed the rules so that you can get it through with a 51 vote that's how the tax cuts and jobs act went through by the republicans but you still are going to have to have enough support to get it through so will we have enough support to go from 23.8 capital gain to what would be in up above 40 because we would go back up also the proposal would be to go from a 37 top individual tax rate to a 39.6 percent top rate and then you have to add on that 3.8 net investment income tax that we have so that's one thing that's on the table another one that's really big is what about the whole estate tax what about the whole death what about all that well there's a couple ways they could go on this and they've kind of proposed both one would be eliminate the step up in basis which would be big right i seem more likely in the short term to lower that estate tax exemption that has gone really high right so over 11 million dollars per person right now i see that being lowered um but then another proposal that would really be hard for farms and i cannot see this passing without an exemption of some kind or a high dollar amount but proposal would be that death or gifting is a recognition event what does that mean well instead of worrying about no step up in bases it would just trigger the tax so if i had land at five thousand dollars an acre and it's now worth ten thousand dollars an acre and i die we're not talking anymore about not stepping the basis up to ten thousand dollars we're now talking about tax owed on the five thousand dollar difference now that that would be pretty devastating i i can't really see that going through fully but that has been the proposal and then eliminating like kind exchange you know the whole swap drop drop swap swap drop like those are the things and i'm out of time but we could talk all day about this but just know nothing is certain these are all just proposals no white paper nothing detailed very vague um proposals at this point stay tuned thank you so much christine we appreciate it sadly we are out of time so we will have to stop taking questions now but we appreciate all of the insight and everything you've been able to help us understand better today i'd like to remind the audience that if you are