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Congress reached a deal on a new $900 billion stimulus package just days before Christmas. The president has now signed it and stimulus checks are on their way to many Americans.

The deal comes as the pandemic surges from coast to coast, and after several months of no additional financial help from the government for struggling Americans and their businesses.

A key component of the law, and very welcome news for businesses, is the word that taxpayers will be allowed to deduct costs covered by their Paycheck Protection Program (PPP) loans. The resolution on PPP loan expenses & tax deductibility will ease some frustrations for businesses in the middle of year-end tax planning.

The stimulus package also provides more funding for a new round of PPP loans, stimulus checks for most Americans, and an extension of federal unemployment benefits, among other provisions.

GJM’s Bob Bobek, CPA co-presented a webinar in partnership with the Employers’ Association’s Bob Bethel, SPHR, SHRM-SCP on December 28. They took a closer look at what’s in the stimulus package and what it means for your family and your business. Bob Bobek also covered the latest guidance from the Small Business Administration (SBA) regarding the forgiveness questionnaire for existing Paycheck Protection loans at or over $2 million.

If you were unable to attend the webinar, you now have access to the recording. You can also access other resources in the GJM COVID-19 Resource Center. 

As always, you're encouraged to reach out to your GJM team with any concerns or questions.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.   

Welcome News for Businesses with PPP Loans

The new stimulus package signed into law in late December brings billions more in aid to American businesses. Among the provisions of the nearly 5700-page law: an extension of the Employee Retention Credit (ERC), which is designed to support businesses that keep employees on payroll during the pandemic. The ERC has been extended through June of 2021 and is now available to businesses with Paycheck Protection Program (PPP) loans.

What is ERC and how does it work?

 The ERC is a refundable payroll tax credit that was included in the CARES Act of 2020 with the intent to keep employees on staff throughout the Covid-19 pandemic. For the period March 12, 2020 through year-end, businesses that met one of two tests could claim a credit of up to $5,000 of wages paid per employee. The eligibility tests were either:

1) At least 50% reduction in gross receipts for any quarter in 2020 as compared to the same quarter in 2019 or

2) Full or partial business closure due to a government shutdown in any quarter in 2020

One major note from the CARES Act: Employers that applied for a forgivable Payroll Protection Program (PPP) loan through the SBA were not eligible for the ERC.

Now let’s fast-forward to the impact of the Consolidated Appropriations Act, 2021. Under Act Section 206, businesses can now receive both forgivable PPP loans and remain eligible for ERC. This appears to be retroactive back to March 2020, but there are some unknowns. Here are some things we do know about changes to the ERC:

• The same wages cannot be used to qualify for both PPP forgiveness and Employee Retention Credits
• If utilizing both the PPP and ERC, employers are supposed to treat wages as qualified for ERC purposes before PPP loan forgiveness

So, what do those employers do who have already filed for PPP round one forgiveness? We will have to keep apprised for guidance on this nuance, as it likely affects many businesses.

Some more welcome news for businesses Under Act Section 207: the ERC is now extended through June 30, 2021. The first eligibility test related to the 2021 credits has been eased to only a 20% reduction in gross receipts. Note, this is still in reference to a quarter-over-quarter comparison to 2019 gross receipts. Employers are now eligible for a credit of up to 70% employee wages rather than the 50% eligibility that remains for 2020 credits, and rather than limiting wages per employee to $10,000 per year, this limit is applied per quarter in 2021.  This equates to a maximum of $14,000 in credits per employee for 2021 as compared to the 2020 cap of $5,000 per employee. 

The last major benefit for 2021 ERC calculations is the increase on allowable company size when determining qualified wages. For 2020, employers with 100 or fewer employees could include all wages paid to employees towards this credit. For 2021, this limit is adjusted to 500 or fewer.  Keep in mind, employers with more than 500 employees may still be eligible for a credit; their definition of qualified wages is just limited.

It is important to acknowledge the impact of both PPP and ERC being made available for businesses. Here’s a very simple example of how a company may benefit from both during 2021:

Company A, a manufacturer, has 60 employees, each earning a $50,000 annual salary. Company A meets the gross receipts test for Q1 & Q2 2021 for ERC and for a second round of PPP funding, receiving in January 2021.

             The ERC calculation should be addressed first, as wages are qualified for this credit prior to PPP forgiveness eligibility.  

Company A’s 2021 ERC would be:

70% x $10,000 qualified wages x 60 employees x 2 eligible quarters = $840,000 ERC

Company A also received PPP round two funding of $605,000. The $1,200,000 wages ($10,000 per employee x 60 employees x 2 quarters) used to calculate the Employee Retention Credits cannot be included in wages paid for Company A’s PPP forgiveness application. This means the ERC may limit PPP forgiveness.

Company A will likely spend over $1.3M in wages over their 24-week PPP forgiveness period, meaning only the wages in excess of $1.2M will be eligible for PPP forgiveness purposes. Since PPP loans must be at least 60% spent on payroll, you may have to pay back a portion of the loan.

Moral of the story: Many businesses who qualify for PPP and ERC can benefit from both, so don’t overlook ERC available to you. Just keep in mind the credits you may receive when filing your 941’s could limit your total PPP forgiveness.

In Summary

Overall, the 2020 and 2021 ERC changes are positive for employers and their employees. Businesses just have to keep in mind the computational changes are only effective for the first half of 2021 and forward. There’s still a lot to learn and interpret as we apply these changes in practice in the coming months. I would encourage you to stay in close contact with your GJM tax advisory team as you make decisions for your business in the days and weeks to come. You can also find further resources in the GJM online Covid-19 Resource Center.

Onward! 

Lauren Webber, CPA, EA is a tax supervisor at Gilmore Jasion Mahler with five years of public accounting experience. Lauren specializes in tax planning and consulting for individuals and businesses in a variety of areas including construction & real estate, and manufacturing & distribution. She has experience with flow-through entities and multi-state taxation, along with a deep understanding of the research & development federal tax credit rules. She is a member of the American Institute of Certified Public Accountants (AICPA).

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

With a flurry of recent developments related to pandemic aid for businesses, as well as the coming change in leadership in our nation’s capital, we think it’s important to provide some perspective, insight and information to help our clients, and all businesses make the decisions they face as the new year gets underway.

$900 Billion Stimulus Package

The Consolidated Appropriations Act of 2021, signed into law in late December brings more relief for businesses. Here is a recap of some important facts:

• Allows tax deductibility of expenses paid with forgiven Paycheck Protection Program (PPP) loan funds, an issue that had been of great concern for businesses
• Establishes that Economic Injury Disaster Loan (EIDL) grants and SBA 7(a) loan payments paid by the SBA are not taxable income
• Ends mandate to provide Emergency Paid Sick Leave (EPSL)
• Continuation of additional payments of unemployment insurance
• Continuation and expansion of PPP:
• Original PPP reopened applications for first time borrowers or borrowers who have returned loans due to lack of guidance
• List of eligible participants expanded to include more nonprofits
• EIDL grants of $10,000 are no longer required to be deducted from the PPP loan forgiveness amount

Second round of PPP loans made available

•  $284 billion, targeting smaller businesses and those more negatively impacted by the pandemic
• Businesses must show a 25% decrease in revenue in one of the four quarters of 2020 as compared to the same quarter in 2019
• Loan dollars can be used to cover more expenses including some operation costs, worker protection and property damage
• Application form is now available and the SBA portal may begin accepting applications as early as Monday, January 11, 2021

PPP Forgiveness:

SBA to issue a new one-page loan forgiveness application for loans under $150,000

Employee Retention Tax Credit

The new stimulus package also extends and expands the Employee Retention Credit (ERC) which is designed to support businesses keeping employees on payroll during the pandemic. The ERC has been extended through June of 2021 and makes it available for PPP loan borrowers.

More Resources

GJM Stimulus Package Webinar Recording (December 28)

GJM Assurance partner Bob Bobek, CPA co-presented a webinar on the new stimulus package on December 28^th in partnership with The Employers’ Association. You can watch the webinar and access the slides in the GJM COVID-19 Resource Center.

GJM Tax Policy Uncertainty Webinar (January 14, 2021)

The transition to the Biden administration and to a democratic majority in the Senate has some feeling uncertain about potential tax increases in the months ahead. The recent unrest at the Capital Building has added to the uneasiness. We are hearing from some clients asking if they should take aggressive measures soon to protect themselves and their businesses from potential tax increases on the way. GJM Tax Partner Charlie Heid, CPA will host a brief, informal webinar “Coffee with Charlie” on Thursday, January 14 at from 3-3:30 pm to help answer questions and alleviate concerns. The half hour webinar will include a short presentation followed by a Q&A session.

The new stimulus package and other measures will surely help businesses in the months ahead. Should you have any questions or concerns, please connect with your GJM team. As always, we are here to help as your trusted advisors.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

As the U.S. economy struggles to recover from the catastrophic impact of the COVID-19 pandemic, and amidst surging COVID cases across the nation, an economic expert says there is reason for optimism.

Kevin Depew, Deputy Chief Economist for RSM US LLP, made his comments during a virtual GJM Manufacturing & Distribution Financial Executive Roundtable on Thursday, November 19, 2020. Depew was the featured speaker in the GJM webinar. His presentation focused on the current state of the economy, the impact of the presidential election and the significant challenges brought on by the pandemic.

Depew says the current second wave of the pandemic is a major risk to our economy, including manufacturing, with employment seeing the main impact. He discussed the potential for further fiscal aid once a new administration is in place and struck an optimistic tone when referring to the potential economic impact once a COVID-19 vaccine becomes available.

Depew says RSM’s team of economic experts is of the belief that once the pandemic is under control, what awaits is a robust economy. He says it is a matter of the business sector getting through the next 6 to 9 months before vaccines become available for the general population.

To learn more, you can view the full recording of Depew’s presentation. You can also find more in the GJM COVID-19 Resource Center. And, as always, we encourage you to be in close contact with your GJM Manufacturing Specialist Team as your business navigates this uncertain economy.

GJM hosts Manufacturing & Financial Executive Roundtables three times a year for area manufacturers. The events are designed to bring businesses together to share ideas and hear from experts on varying topics. If your manufacturing or distribution business is interested in receiving invitations to future roundtable events, please email info@gjmltd.com.

GJM is a member of the RSM US Alliance.

RSM US Alliance member firms are separate and independent businesses and legal entities that are responsible for their own acts and omissions, and each are separate and independent from RSM US LLP. RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit, tax and consulting firms. Members of RSM US Alliance have access to RSM International resources through RSM US LLP but are not member firms of RSM International.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.

To say the workforce shortage taking place within the manufacturing industry so vital to Northwest Ohio has long been front-of-mind here at Gilmore Jasion Mahler is, perhaps, an understatement. The shortage was the subject of a major roundtable event our firm hosted in 2017, which drew industry experts and panelists from universities, career centers, and other manufacturing professional organizations. The roundtable, as well as our previous report on the workforce shortage, highlighted the so-called “perfect storm” that exists within the manufacturing industry.

This perfect storm involves three major factors:

1. Increased emphasis on the four-year college degree
2. Decreased emphasis on career-focused or technical education
3. Continued workforce population shift from baby boomers to millennials

Perfect Storm Meets Pandemic

Of course, each of these contributing factors has been brewing for decades, some stretching back as far as the years immediately post-World War II. In the years since, with many people encouraging youths entering the workforce to avoid skilled labor careers, and the overall public perception of the industry suffering several blows as well, fewer and fewer workers chose manufacturing. Once the baby boomer population began aging out of the workforce in 2011, the incoming workforce meant to replace them found themselves without the necessary skills.

With the early 2020 onset of the COVID-19 pandemic in Northwest Ohio and across the United States, this long-brewing storm gained yet another source of fuel for its fury. Businesses considered nonessential faced shutdowns as the nation attempted to halt the virus’s spread, leading to the layoff of nearly 100,000 skilled workers in Ohio alone. Meanwhile, essential businesses found themselves dealing with reductions in the workforce due to employee illness, regulation changes regarding social distancing, and rapidly shifting demand.

Enhanced Effects

As the United States continues to back away from utilizing products manufactured overseas, particularly in China and other politically charged regions, the demand for US products continues to rise amidst a diminishing manufacturing labor force. It’s easy to assume that at least some of the 22 million unemployed workers across the US could assuage the ongoing manufacturing workforce shortage. While it’s true that some unemployed workers could make the transition to manufacturing industry roles, the majority of America’s unemployed in hard-hit sectors like hospitality, retail, and travel are not equipped to fill open manufacturing jobs.

As a result, Ohio alone has lost an estimated 22,000 manufacturing jobs since the beginning of the pandemic. Product demand is stable or rising, older workers are retiring, there are not enough skilled workers left to fill the open positions with a labor force participation at 63.2% and still, the misconception is that desirable jobs within the manufacturing sector aren’t there.

Moving Forward

As Northwest Ohio recovers from the effects of COVID-19, the workforce shortage storm continues to cast its shadow on the manufacturing industry. Fortunately, our roundtable experts’ conclusions remain valid: Manufacturers are finding ways to adapt to the situation by altering their product offerings and taking steps to ensure employees remain safe. Career-minded individuals are more carefully considering the value of a bachelor’s degree versus career-focused technical training. Manufacturers have also stepped up in the Northwest Ohio region to establish an organization to help drive solutions. The Northwest Ohio Manufacturing Alliance (NOMA) already has a number of area manufacturers as founding members who have decided to join forces to work to solve the workforce shortage.

To capitalize on the existing forward momentum, all stakeholders must continue efforts to destigmatize manufacturing careers. Meanwhile, policymakers looking to sustain the Northwest Ohio economy need to take a serious look at how they can help bring more jobs to the area and encourage the necessary steps to build the local workforce.

Much as we concluded in our prior piece, it is only when manufacturers, schools, parents, career advisors, community members, and policymakers work together that we can begin addressing the key factors leading to the ongoing shortage and repair Ohio’s economic outlook.

For more about this topic, turn to the Manufacturing Specialist Team at Gilmore Jasion Mahler. Our accounting firm remains connected to manufacturing financial executives and industry leaders and continues to stay abreast of these essential developments. Contact GJM today, or send an email to info@gjmltd.com to request additional information.

Established in 1996, Gilmore Jasion Mahler, LTD (GJM) is the largest public accounting firm in Northwest Ohio, with offices in Maumee and Findlay. Locally owned, GJM offers cloud-based accounting and provides comprehensive services including assurance, business advisory, tax, risk advisory, healthcare management and outsourced accounting. The Firm’s professionals specialize in industries including construction & real estate, healthcare, manufacturing & distribution and utilities.