Minnesota’s 92nd legislative session ended their 2021 regular session on May 17th without a budget. The Governor and Legislative leaders instead released a budget framework with a target of $52 billion for the next biennium. Lawmakers worked for four weeks on final details largely outside of the public eye until they convened a special session on June 14th. All spending bills were passed and signed into law by June 31st.
The need for a special session was largely due to a late infusion of funding from the American Rescue Plan Act (ARPA) that was signed into law by President Biden on March 11, 2021. Roughly $8.5 billion was allocated in the bill to the State of Minnesota for various programs.
A final budget of $52 billion was signed into law on June 31, 2021. This biennial budget is an increase of approximately $1.3 billion over the previous budget – much of that one-time funding from ARPA. Included in the bill are direct tax cuts of $644 million to people who lost jobs and employers who kept people working during the pandemic.
Paycheck Protection Program
The final tax bill included full conformity to federal tax law with regards to the Paycheck Protection Program at a cost of roughly $375 million in fiscal year 2022. Businesses and organizations that received PPP loans will not be subject to either federal or state income tax on the amount of the loan received.
Today, Greater Mankato Growth sent a letter to Governor Tim Walz providing statistics to create awareness of talent challenges facing our region.
The Department of Employment and Economic Development has taken great strides to ensure that individuals receiving unemployment insurance are aware of the job opportunities that exist across the state.
We asked that the State implement measures to supplement the work that is being done surrounding awareness of job availability by creating enforcement measures, while offering flexibility for those still impacted by COVID-19 considerations. You can read the full letter here.
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Governor Walz announced a three-step process that will lead to an end of COVID-19 restrictions in the May 6 address. Restrictions will be loosened at noon on May 7, 2021, all capacity restrictions will end by May 28, and the masking requirement will be removed when 70% of Minnesotans ages 16+ are vaccinated or by July 1, whichever comes first. Full text of Executive Order 21-21 can be found here.
The changes announced in the May 6 address are as follows:
STEP ONE: Noon on Friday, May 7
Outdoor occupancy restrictions for restaurants, bars, and other places of public accommodation offering food, beverages, or tobacco products will be completely removed.
Indoor capacity limit per table will increase from six to ten individuals per table.
The closing curfew of 11:00 pm will be completely removed.
Food and beverage businesses with sufficient indoor space to exceed the 250 person capacity restriction will be able to exceed that as long as they remain within 75% capacity and can follow Stay Safe Minnesota Guidance.
Indoor public pool capacity will be set at 50%, not to exceed 250 people; however, spaces with sufficient capacity can exceed 250 people if they can follow Stay Safe Minnesota Guidance and stay within 50% capacity guidelines. All restrictions on outdoor pool areas will be removed.
For fitness, recreation, indoor sports facilities, and other similar facilities, the 50% capacity guidelines will continue, but only for indoor spaces within the facility. Maximum indoor capacity of 1500 for spaces capable of following Stay Safe Minnesota guidelines will be removed. Mask restrictions for these facilities will only be required indoors.
Indoor social gatherings will increase from 15 to 50 people.
Total indoor capacity for entertainment venues will be removed if they can safely exceed 250 people while remaining under 50% capacity and follow Stay Safe Minnesota guidelines. All outdoor capacity for these spaces will be removed.
Greater Mankato Growth participated in the U.S. Small Business Administration webinar on April 28th to learn more about the Restaurant Revitalization Fund and its application process. In short, the Restaurant Revitalization Fund will allow restaurants, bars, and other similar entities (a full list of eligible entities can be found here) to receive a grant that covers all lost revenue in 2020 compared to 2019. Please note special rules apply to entities that opened after January 1, 2019 or that still haven’t opened. This blog post will first share how to apply and will then share additional details on the specifics regarding the program.
The SBA will open up the opportunity to create an account at restaurants.sba.gov this Friday at 8 a.m. Central Time by choosing “Register to start your application.” Applicants are strongly encouraged by the SBA to create their accounts on Friday and not to wait until Monday. The opportunity to submit an application will open on Monday, May 3, at 11 a.m. Central Time. The SBA holds that the website is designed to support expected traffic with all restaurants submitting applications at that time. Applicants are strongly encouraged by the SBA to submit their application at the first possible minute. Additionally, applicants are encouraged to review all documentation at the SBA’s webpage on the fund. Please note that a recording of the SBA webinar can be viewed at the end of the “How to Apply” section of this blog.
The first step applicants should take is registering (creating a login account) at restaurants.sba.gov on Friday at 8 a.m. Applicants that plan to submit their application via the point of sale (POS) providers Square or Toast do not need to register. Entities utilizing Clover or Aloha should still register. The only requirement when registering on Friday is that applicants must have a mobile phone as a text will be utilized to verify the login.
It’s key for applicants to to begin preparations ahead of the when the application process opens Monday May 3, at 11 a.m. Applicants can prepare by following instructions below, reading the program guide, having all documentation prepared in labeled PDFs, and completing the sample application. Applicants that have conducted this pre-work are expected to complete the application in roughly 25 minutes. The SBA encourages that restaurants that seek to apply should be prepared to submit their application in the first possible minute after the portal opens. The website currently handles more traffic than is expected on Monday and is not expected to crash.
This week, President Biden signed the $1.9 Trillion American Rescue Plan. This is the third major stimulus package passed by the Federal Government in response to the COVID-19 pandemic. While there has been much discussion about relief to individuals including a new round of $1400 stimulus checks & unemployment benefit extensions as well as increased funding for vaccine purchase & distribution, this blog post will focus on the relief programs impacting businesses including the creation of the Restaurant Revitalization Fund, expansions and changes to the PPP & EIDL loan programs, and expansions and changes to the Employee Retention Tax Credit Program. The full text of the law can be found here.
Restaurant Revitalization Fund
Edit: An updated post specific to the Restaurant Revitalization Fund & how to prepare for an application can be found here.
Restaurants, bars, & other elligible entities will be elligible to apply for a grant equal to 2019 revenue minus 2020 revenue minus PPP loans already received.
Businesses that opened in 2019 will determine their amount of grant eligibility by multiplying their average monthly gross revenue in 2019 by 12.
Businesses that opened in 2020 that experienced operating losses will be elligible for a grant under a similar formula that covers losses incurred.
Businesses that have not yet opened but that have already incurred payroll costs will be elligible for a grant that covers those expenses.
*Note: Formulas for determining grant eligibility for all three above categories may be modified via SBA guidance.
The Paycheck Protection Program has been one of the most visible programs inside the US Government’s response to the pandemic. The overall goal of the program was to get loans to small businesses to help them keep their staff employed as we entered the unknown waters of a pandemic economy. If these small businesses kept their staffs employed, these loans would be forgiven, and the loans would essentially convert into grants. There was recently a change to how much funding a small business would qualify for, and this change will have a dramatic impact on the smallest businesses who were previously either left out of the program or only qualified for a nominal amount of funds.
These changes revolve around people who report their business income using a Schedule C on their tax return. Schedule Cs are typically used for sole proprietors (fancy way of saying people who do business in their personal name with no formal entity like a LLC or corporation), but some LLCs also use Schedule Cs. Up until this point, these businesses would determine the amount of a loan they qualified for by combining the annual payroll costs of any employees with the net profit of the business. These two figures formed the basis of the calculation, and the idea was that these figures would represent the combined compensation paid the employees and the owner.
The unintended consequence of how the program was initially setup is that many of the smallest businesses operate at essentially a breakeven where income is nearly entirely offset by expenses. Due to this, the “owners” portion (net profit) could be very low or $0 which caused their PPP loan amount to go down. With the new changes, the “owner” compensation portion of the calculation has been switched from using the net profit to the gross profit. This change will dramatically impact the amount of PPP funds a small business can qualify for as well as even allowing some businesses with a negative net profit to receive PPP funds when previously they did not qualify at all.
These changes became effective on March 5th, and they will be in place through the end of the program on March 31st. This can have a massive impact on some of the smallest businesses in our community. Businesses that use Schedule Cs range from popup stands at the farmers market to businesses on Front Street. This group of businesses provide much of the vitality that makes Mankato special; so let’s get the word out so these businesses survive!
At Pioneer Bank, we have funded over 1,350 PPP loans for our community with a median loan size of $20,000. Most banks have access to this program, but anyone can feel free to send any questions to Clay Sharkey.
Capacity for private social celebrations & events (including but not limited to weddings, funerals, life milestones, family reunions, religious services, and other similar occassions) occurring at venues involving the consumption of food or alcohol has increased from 10 indoor & 15 outdoor to 50.
Maximum capacity of indoor and outdoor space for restaurants, bars, gyms, & venues providing entertainment expanded from 150 to 250.
Facilities allowing food and beverage consumption are allowed to remain open until 11:00 pm rather than 10:00 pm
The following blog post was contributed by Abdo, Eick & Meyers, LLP to assist businesses in understanding how recent federal legislation has changed criteria related to the Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC).
The COVID Tax Relief Act (COVIDTRA) that was passed late December made drastic changes to the Paycheck Protection Program (PPP) and the Employee Retention Credit (ERC) for both 2020 and 2021. The most critical changes for eligible employers include:
Qualifying expenses paid with PPP funds are now deductible for federal income tax purposes, however, we are still waiting on guidance from most state legislatures regarding state deductibility. This change officially means that PPP loans and their forgiveness will not be subject to federal income tax.
Employers may now be eligible for the Employee Retention Credit (ERC). Previously, organizations which received a PPP loan were ineligible to claim the ERC. That requirement has been removed and the credit has been extended through the first six months of 2021. To employers that are eligible, the ERC may provide up to a $7,000 per employee tax credit per quarter.
The SBA announced they will begin accepting applications for new PPP loans from limited borrowers beginning January 15, 2021. Minority and women-owned businesses will be able to borrow first-time PPP loans initially, followed by minority and women-owned businesses requesting a second-time loan.
The COVIDTRA legislation is good news for many employers. There are several critical planning considerations to discuss with your tax advisor to maximize your credit eligibility and avoid missing out on significant funding. Key decisions that should be discussed include:
Applying for a first-time or second-time PPP loan.
Applying for 1st round PPP loan forgiveness if your organization experienced a partial or complete operational shutdown or a significant reduction in 2020 gross receipts.
Electing to take the Employee Retention Credit for 2020 or 2021.
There are still many unanswered questions about the PPP and ERC that we expect to receive further guidance on from the IRS in the coming weeks. Additionally, are a few strategies to consider when determining if PPP, ERC or both are right for your specific situation. Be sure to contact your tax advisor to discuss your organization’s relief options and ensure that you don’t miss significant tax credits and funding opportunities.
About Abdo, Eick & Meyers, LLP
Abdo, Eick & Meyers is a progressive CPA firm that leverages its “People + Process” by partnering with businesses to increase value, helping government audit clients operate more efficiently, and providing the very best in tax planning and preparation services. Established in 1963 in Mankato, Minnesota, the firm has evolved into a mid-sized leader in the regional accounting industry through a combination of steady organic growth and key mergers and acquisitions. Since its earliest days, the firm has carefully listened to its clients and then developed new areas of expertise and service lines to meet their needs. Learn more at www.aemcpas.com.
The Minnesota Legislature and Governor have passed legislation authorizing funding to Minnesota counties for relief grants to local businesses and nonprofits impacted by an executive order related to the COVID-19 pandemic.
Small businesses and nonprofits in Nicollet County impacted by COVID-19 can apply to receive grants to help with expenses incurred during the pandemic.
Grant awards will be provided to eligible businesses and nonprofits that have been adversely impacted by a Minnesota Governor executive order related to the COVID-19 pandemic.
Applicants must also have experienced a financial hardship as a result of the public health emergency. Grant awards will be up to $10,000 based on eligibility.
Grant applications and IRS Form W9 must be emailed to email@example.com or left in the Nicollet County Government Center drop box located on Mulberry St. in St. Peter by 4:30 p.m. on February 5, 2021.