by Evan Benevento
Like almost every industry, farmers and ranchers are not immune from the negative effects of the COVID-19 pandemic and economic shutdown. Producers of specialty crops, especially those that partnered with food service customers are seeing declining revenues. In order to provide some economic relief to those that produce our food, the USDA has set up the Coronavirus Food Assistance Program (CFAP) which will provide up to $16 billion in direct payments to farmers.
Producers of specified agricultural commodities who have suffered a five percent-or-greater price decline as a result of the COVID-19 pandemic and who face substantial marketing costs for inventories are eligible for CFAP payments. The list of eligible commodities includes: Apples, Blueberries, Broccoli, Cauliflower, Lettuce (Iceberg and Romaine), Raspberries, Spinach, and Strawberries. A full list of eligible commodities and CFAP payment rates can be found here: https://www.farmers.gov/cfap. Note: If you are a producer of aquaculture products, nursery products, or cut flowers the USDA wants to hear from you about prices and the effects of COVID-19. Contact your local USDA service center which can be found here: https://offices.sc.egov.usda.gov/locator/app.
Due to our location in the Pajaro Valley and neighboring Salinas Valley we will be focusing only on specialty crops for this post, and there are up to three categories of payments for specialty crops:
- Category one payments are for crops that suffered a more than five percent price decline between January 15, and April 15, 2020.
- Category two payments are for produce that was shipped but subsequently spoiled due to a lack of marketing channel.
- Category three payments are for shipments that did not leave the farm or mature crops that remained unharvested.
Not all specialty crops will qualify for all categories of payments. The USDA has indicated that they will request documentation from producers to substantiate claims on a case-by-case basis and some details are yet to be determined.
For category one crops, the USDA is expecting producers to maintain records, such as a bill of sale, documenting the price received for the crop.
For category two, the producer must obtain documentation such as a letter from the buyer explaining non-payment or other record that validates the non-payment claim. Only crops that have met contractual obligations of delivering crop to the buyer but have not been paid will qualify.
Category three payments are for crop shipments that did not leave the farm by April 15, 2020, (for example, were harvested but sitting in crates on the farm), or mature crops that were unharvested by that date (for example, disked) due to lack of buyers, and which have not been and will not be sold. If you are unable to provide adequate documentation of pounds of crops spoiled or acres disked you may not qualify for payment.
There is a payment limitation of $250,000 per person or entity for all commodities combined. Applicants who are corporations, limited liability companies or limited partnerships may qualify for additional payment limits where members actively provide personal labor or personal management for the farming operation (400 hours test). Producers will also have to certify that they have less than $900,000 of Adjusted Gross Income unless at least 75 percent or more of their income is derived from farming, ranching or forestry-related activities. Eligible producers will be able to apply beginning May 26, 2020, and the application and additional information can be found here: https://www.farmers.gov/cfap.
The Coronavirus pandemic has caused unprecedented disruption across industries and has negatively affected producers of our nation’s food supply. Through the USDA CFAP program, eligible farmers can receive direct payments for losses due to the pandemic. This program can benefit many local farmers and ranchers, even those who have never participated in a farm program before, and may be worth the time commitment for the application process.
Wondering if you’re eligible for a CFAP direct payment or need assistance preparing for or completing the application? We’re here to help! Please call 831-726-8500 or contact email@wheelercpa.com.
Relief for taxpayers facing the challenges of COVID-19-related tax issues is now available through the IRS People First initiative. The projected start date will be April 1 and the effort will initially run through July 15, 2020. During this period, to the maximum extent possible, in-person contact will be avoided; however, the IRS will continue to take steps where necessary to protect all applicable statutes of limitations.
Small and medium-sized employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing coronavirus-related leave to their employees. This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (Act), signed into law on March 18, 2020.