By Ronnie Miles, Director of Advocacy, NGCOA
On December 27, 2020, President Trump signed the Consolidated Appropriations Act of 2021 (Act) into law. The Act includes the COVID-19-related Tax Relief Act of 2020 and the Taxpayer Certainty and Disaster Tax Relief Act of 2020. The bill is one of the most extensive spending measures ever enacted, surpassing the $2.2 trillion CARES Act, enacted in March 2020. Included was $900 billion in stimulus relief for the COVID-19 pandemic.
The golf industry, like other small businesses, will find several benefits from the new stimulus package. One which impacts the over 6,000 golf courses that participated in the first round of PPP loans, is the reversal of the IRS guidance prohibiting PPP recipients from the deductibility of ordinary and necessary business expenses forgiven as part of the Paycheck Protection Program.
While the golf industry realized record-setting rounds, thus reducing the number of owners requiring additional PPP loans, those owners with lodging and extensive food and beverage operations will benefit from the new feature permitting previous PPP loan recipients to request a second draw loan. In order to qualify for a second PPP loan of up to $2 million, provided the business has 300 or fewer employees, has used or will use the full amount of their first PPP loan, and can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019. Golf courses that have not applied for a PPP loan may still apply for first-time draws.
The standard calculation to determine the maximum loan amount a business is eligible to receive is 2.5 times their average monthly labor expense (wages and salaries). However, operations that include lodging and restaurants with a NAICS Business Class Code of 72 may use a factor of 3.5 times their average monthly payroll to determine maximum loan eligibility. Should your full loan not be approved for forgiveness, the Act lowers the loan interest rate from 4% to 1% with a maximum repayment period of five years. Another critical tax change impacting our restaurants is the increased tax deduction allowance for business meals from 50% to 100%. This increase is in effect through 2022.
As was the case in the original stimulus package, many of our private clubs organized as a 501(c)(7) entity are prohibited from participating in the PPP loan program. They along with many other golf owners elected to participate in the Employee Retention Tax Credit program that provided a refundable payroll tax credit of 50% of certain qualified wages. This credit was capped at $5,000 per employee, up to $10,000 per quarter. The Act increases the credit to $7,000 per quarter and increases each employee’s maximum amount to $14,000.
The original CARES Act denied the employee retention tax credit to any employer that receives a loan under PPP and defined the term “employer” expansively, potentially causing acquiring corporations with employee retention tax credits to lose or recapture those tax credits if they acquired a target company that had received a PPP loan. The Act permits an employer that receives a PPP loan to receive the employee retention tax credit. However, to prevent any double-dipping, an employer must either exclude “qualified wages” that allowed the employer to claim employee retention tax credits from “payroll costs” for purposes of determining its loan forgiveness under the PPP (to reduce the amount of loan forgiveness) or exclude “qualified wages” that qualified for PPP loan forgiveness from “payroll costs” (so as to reduce the employee retention tax credit). This change applies retroactively to the effective date of the CARES Act.
The Act reinstates the Emergency Injury Disaster Loan (EIDL) program, which also includes the EIDL advance grants. For PPP borrowers who received the EIDL advance, the Act reverses the requirement to include your forgiveness request. The advance is now treated as a grant, as congress initially intended. EIDL loan applications will continue to be accepted through December 2021, pending the availability of funds.
This article is a brief overview of the programs and their benefits for your business. The guidance continues being developed and we encourage you to monitor the NGCOA website for the latest information.
Ronnie Miles is NGCOA's Director of Advocacy, and can be reached at rmiles@ngcoa.org.