Links to the government websites

SBA PPP 2.0

SBA PPP First Round

SBA PPP Forgiveness

Treasury.gov PPP (both)

1/8/21

Alan Gassman and his team summarized the 116 pages that the SBA wrote to support the $900 Billion stimulus package. Here is their 1/7/21 Forbes.com article that covers many more details than I have listed.

Despite the government rules, we are seeing that the banks all have slightly different requirements. So just be methodical.

Check out my post on PPP Forgiveness here

PPP 2.0

Deadline to apply is March 31, 2021

If you received a PPP loan in the first round, you qualify for a second PPP loan if any quarter in 2020 had a decrease of 25% revenue compared to 2019. Be careful: with all of these programs, the devil is in the details. For the PPP 2.0 program, you must calculate the revenue the same way you calculate the revenue on Line 1.c. on your tax return. So if you file your tax return on the cash basis, this needs to be a cash basis revenue. Also, Line 1.c. does not include random income like sale of equipment and interest income.

Once you determine that you qualify, to calculate the amount of the loan you may choose either your 2019 labor or 2020 labor expense, divide this by 12, then multiply by 2.5. This is the same formula as the first round, however,  you may include a few more expenses. Please refer to the SBA guidelines for the exact inclusions.

If you submit your loan application to the same bank as the first round, and you apply for the same loan amount, you can use the same documents that you submitted the first time. We have not heard from any banks yet whether you have to actually upload all of the documents again. Fingers crossed.

My recommendation is that unless you will get a significant increase in your loan amount, stick with your original loan and keep things simple. You are likely to qualify for a significant Employee Tax Retention Credit, so save some brain cells for that.

You don’t have to have applied for Forgiveness, but you have to have used all of your loan funds. I don’t know anyone who didn’t spend all of those funds, so this should be a moot point.

PPP First Round

If the rules changed, you can now apply for a PPP First Round loan. If the rules changed such that your loan would have been higher with the new rules, you may submit an amended application.

Farmers and  Schedule F filers may now based on their GROSS income (yes, that is GROSS, not NET). Many farmers were not able to apply during the first round because they did not have payroll and used a vineyard management company.

Partners of LLC may now use their Net Profit based on the K1 as the owner “payroll”.

Both of these are limited to 100k “payroll”.

Links to the latest news from the source

Treasury.gov PPP Program

SBA.gov PPP Program

PPP Forgiveness Application Update 12/27/20

The COVID Relief bill that Congress passed included these details:

• The 12/14/20 IRS ruling was soundly reversed by Congress. This means that no part of the PPP Loan is taxable: the forgiven loan is not taxable as income, and the expenses paid by the forgiven loan are deductible on your tax return.
• A Simplified One Page Forgiveness Application for loans under $150k – we have heard this promise before. Hopefully the banks will follow through. Unfortunately we have seen many banks add their own forms and requirements to the forgiveness process.
• EIDL grant is now fully forgiven – if you submitted your Forgiveness Application and deducted the EIDL grant, check with your bank to confirm whether you should submit an amended forgiveness application or if the correction will be made automatically. Did I mention that the banks seem to act independent of the SBA rules….
• Make sure you understand the rules around the Employee Tax Retention Credit – this credit is now available to folks who received PPP loans. The caveat is that the expenses that were covered by the PPP Loan are excluded from allowable earnings for the credit. That suggests that you might want to maximize the 40% of other allowable PPP expenses so that you minimize the payroll that is included with PPP Forgiveness.

PPP  Loans & IRS Rulings Update 12/14/20

A few days before Thanksgiving, the IRS issued a ruling that took many people by surprise. Here is the link to the press release on the Treasury website. Here is the detail of the IRS guidance:

If a business reasonably believes that a PPP loan will be forgiven in the future, expenses related to the loan are not deductible, whether the business has filed for forgiveness or not.

As if the PPP Program has not be complicated enough, we were all exasperated when this was issued because it complicates your year end tax planning. You and your tax team will need to discuss whether to plan for the worse (that the IRS ruling will stand as is) or plan for the best (that Congress will pass legislation based on their original intent that the PPP Loan will have no effect on taxable income). Only time will tell how this  will settle down.

In the meantime, we now recommend that you apply for forgiveness sooner rather than later.

PPP Forgiveness Application Update 10/10/20

On October 8th, the SBA released a new form for loans under $50,000. This is just a “simpler” form and is still not  automatic forgiveness. For the details check out this article on Forbes.com

On October 7th, the SBA said that interest on the PPP loan would not begin until either 10 months after the end of the covered period or until the SBA remitted funds to the lending bank. Check out FAQ #52 (previously the deferral period was 6 months) Check out Alan Gassman’s 10/8 article on Forbes.com

On October 3rd, the SBA released new guidelines for businesses that had a change in ownership, either by selling or transferring. Here is Alan Gassman’s 10/4 article on Forbes.com 

PPP Forgiveness Application Update 9/11/20

For the latest update by Alan Gassman read his article on Forbes.com here

On August 24th, the SBA issued some new guidelines around the allowable expenses. Two issues are critical

1. Rent expense to related party is only partially allowed. If the landlord has a mortgage on the property, only the interest portion of the rent payment is allowed. This affects many wineries because they often “rent” the space from a related party that owns the land. Yes this is unfair and illogical, but as with all things PPP, it is par for the course.
2. Medical and retirement payments for owners is more complicated, because depending on the legal structure of the business, the rules are very different.

My recommendation is to extend your covered payroll period to 24 weeks. Remember back when we only had 8 weeks of expenses to earn full forgiveness so we were tracking every expense possible? (I barely remember.) Now that you have up to 24 weeks to earn full forgiveness, most of you will have plenty of payroll wages to cover the entire PPP loan. I think that your Forgiveness Application will be processed smoother and with less hassle if you only use wages for your payroll number and don’t use any other expenses.

My second recommendation is that if your loan is over $150k, go ahead and submit your Forgiveness Application now if your bank has opened their portal and is accepting them. The SBA began accepting FAs on August 10th, but not all banks have opened their portals at this time.

If you are under $150k, you might want to wait for the official ruling around the “automatic forgiveness“. The Rubio/Collins bill called “The Continuing Small Business Recovery and Paycheck Protection Program Act”. This bill was introduced on July 27th and initially had strong bi-partisan support. But it has now become political and has stalled. The banks are the ones pushing for the automatic forgiveness, and many are waiting for this to pass before opening their portals.

PPP Forgivneness Application Update 8/12/20

I am guessing that most of you gave up tracking the guidances issued by the Treasury and the SBA, because there have been so many. Even the Treasury stopped  giving them numbers.

Here are the highlights. For the forms go to Treasury.gov & PPP

• Loan Forgiveness Application, revised 6/16/20
  • If the State or other entity issued an order to close the tasting room, they you have an automatic exemption to the FTE calculation. This means that for most wineries, the FTE calculation is no longer an issue, and you probably qualify for the EZ Loan Forgiveness Application form
• EZ Loan Forgiveness Application, issued 6/15/20
  • Read the instructions first to see if you qualify. Most of you will qualify because the FTE or the average paid hours is essentially “N/A” due to the exemption caused by the mandated closing of the tasting rooms.
  • Pay attention to the “hourly wage” detail. If your tasting room crew is paid by a combination of regular wage, commissions, club signup fee, or other random payment, then you will need to calculate their TOTAL earnings divided by their hours worked for the “effective” hourly wage for a given pay period. This detail could disqualify you from using the EZ form
  • If you do qualify for the EZ form, you must still save all of your documents and worksheets. The distinction is that you do not have to submit them with the application.
• FAQs, updated 8/11/20
  • There have been many changes to the medical, retirement, and “transportation” allowable expenses. However, since the covered period has been extended to 24 weeks, you should have enough regular payroll to achieve full forgiveness without including those problematic expenses.
  • They explain how the EIDL Grant is handled – this is super goofy and convoluted. See my post on handling this detail Go Here

As of today not one bank has opened their portal to begin accepting Forgiveness Applications, although they all have sent out emails saying that it is coming soon. I recommend that you hold off submitting your paperwork a month or so, because the rules are going to change again. The banks will be flooded with applications, and I prefer that someone else’s application gets stuck in that mess. You have a full 10 months after the end of your covered period to submit your application so there is no immediate hurry. However, if you happen to be in a situation where the FTE calculation is critical to meeting full forgiveness, then go ahead and submit now so that you stop the clock.

Once again, my thanks to Alan Gassman and his team. They are providing clear and concise updates in the PPP and EIDL world. Check out his articles on Forbes.com Gassman & PPP 8/4/20

Tyler Willis, CPA and I had a zoom chat where we discussed various issues that are unusual in 2020 due to COVID-19 shutdowns, successful pivots, and the PPP program. And if that wasn’t enough, many wineries had lower production due to the fires. All of these issues are affecting your tax return in a way that you might not have anticipated.

A year like this year is a good year for a deep dive and to make sure that you’re taking advantage of everything you can. TW

Remember, Tyler is a CPA, but he is not your CPA. Our conversation is intended to highlight some topics for you to discuss with your tax preparer.

Topics and time stamp for part 1

• PPP Impacts at 2:00
• EIDL Grant at 7:00
• Higher net income in 2020 than prior year at 9:00
• Crop insurance at 11:00
• Lower production at 13:00
• New barrels but not all in use at 14:00
• Cash vs Accrual on Tax Return at 15:00

Topics and time stamp for part 2

• Loss Carryback Opportunity at 0:00
• Section 139 Deduction at 3:00
• Impact of the election at 6:00
• Key things needed to do a tax return quickly at 9:00
• Adjustment from Book to Cash at 12:00

Now is your opportunity to get access to an exclusive report of over 50 charts, summary analysis and detailed responses of wine industry metrics and trends. You can use these numbers to benchmark your own performance. But hurry, you only have until October 30th before the portal closes.

Each year Rob McMillan and his team at Silicon Valley Bank prepare an annual report called the State of the Wine Industry Report. This is a thorough report that discusses micro and macroeconomic trends that affect the wine industry. It is also a really fun read. The team added some questions about how you handled the  issues around COVID-19

One of the key components to the report is information and metrics submitted by wineries through the Annual Survey.  As a thank you for your time, you will receive a full set of the results which is only available to folks who participate in the survey. Everyone else only gets to download the final report.

To make it easier to complete the survey, I made a video to show you how to pull the reports so you can answer the financial questions. Of course, these reports assume that you have set up your QuickBooks file using our Fundamental Five.

Here is the link to submit the survey SVB Wine Industry Survey

Download these questions to the survey so you can prepare your answers 2020 SVB Survey Questions

This video will walk you through how to pull the answers to the financial questions