Craft breweries in the U.S., which are suffering most from the coronavirus outbreak due to closures of brewpubs and restaurants, may find relief in a USD 2.2 trillion stimulus packed which passed last Friday the U.S. House of Representatives and was signed by President Donald Trump the same day.
The Coronavirus Aid, Relief and Economic Security Act (CARES Act) is the largest-ever economic stimulus package in U.S. history, amounting to 10% of total U.S. gross domestic product. It includes expansion of unemployment benefits; direct payments to families, hospitals, health care systems, providers, and to state and local governments; cash grants to airlines. Industry is supported by a USD 500 billion fund for loans to corporate America and a USD 367 billion loan and grant program for small businesses.
The U.S. Brewers Association (BA) has summed up some critical points how the CARES Act can help a brewery, brewpub, or taproom weather this crisis:
- Requires the Small Business Administration (SBA) to pay the principal, interest, and any associated fees that are owed on the covered loans for a six-month period starting on the next payment due date.
- Authorizes businesses with fewer than 500 employees to obtain SBA loans with the ability to get a portion of the loan used for payroll, salary mortgage or rent, utility payments forgiven. The eligibility requirements for these SBA loans are relaxed with the intention of getting them turned around quickly and into small businesses’ hands.
- Provides emergency grants of up to USD 10,000 to provide immediate relief for small businesses who have applied or are applying for Economic Injury Disaster Loans. These grants will be provided by the SBA and have strict requirements. Any money a business receives for the emergency grant will have an impact on additional loans they may have with the agency.
Other provisions in this bill will impact breweries over the next few months, from unemployment insurance to the delay of payroll taxes. This legislation:
- Includes a retention tax credit to encourage employers to keep workers on payroll during the crisis. Businesses would receive a tax credit for keeping idled workers on their payroll during the coronavirus pandemic. The credit is available to employers whose operations are fully or partially suspended due to a COVID-19-related shutdown order, or employers whose gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. This credit is limited to employment taxes and has additional stipulations.
- Enables businesses to write off immediately costs associated with improving facilities instead of having to depreciate those improvements over the 39-year life of the building.
- Temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30 percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020.
- Provides unemployment benefits to people who are self-employed, independent contractors, have limited work history, and others who are unable to work as a direct result of the coronavirus public health emergency.
- Delays payment of employer payroll taxes allowing employers and self-employed individuals to defer payment of the employer share of the social security tax they otherwise are responsible for paying to the federal government with respect to their employees. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
- Provides a temporary exception from excise tax for alcohol used to produce hand sanitizer. For any breweries/distilleries that have transitioned to hand sanitizer production, the provision waives the federal excise tax on any distilled spirits used for or contained in hand sanitizer that is produced and distributed in a manner consistent with guidance issued by the Food and Drug Administration and is effective for calendar year 2020.
Similar economic stimulus packages already came into force in other countries. Many European nations for example are expanding the institutions and systems already in place instead of just spending big money. Germany, as Europe’s largest economy which relies heavily on its small and midsize companies has already passed about one week before the U.S. a package worth up to 750 billion euros (USD 808 billion) to mitigate the damage of the coronavirus outbreak.