Federal emergency relief bills could help some racing businesses – Horse Racing News
The federal government passed a series of relief bills last week aimed at helping workers and businesses through the economic fallout of the COVID-19 crisis, and some of them could help the racing industry .
On a conference call hosted by the National Thoroughbred Racing Association (NTRA), experts tried to sort through the ever-changing requirements of several new programs created by three relief bills passed last week.
Jen Shah, CPA for Dean Dorton, warned that the government is issuing new guidance and clarification on these programs daily, but provided an overview of what we know as of this week.
Based on federal legislation passed last week, employers with 500 or fewer employees are now required to provide up to two weeks of paid sick leave to workers who are sick or cannot come to work due to quarantine or shelter-in-place orders. Employees should also be granted paid leave to care for a family member or child, including children whose school or daycare is closed due to COVID-19. There is an exemption for employers of 50 or fewer people who can demonstrate that the leave requirements would compromise the viability of the small business. This only applies to employees, not independent contractors.
The government will offer employers payroll tax credits that should offset 100% of the costs incurred in providing this paid leave. These credits would likely be covered in second-quarter tax returns. The goal, according to Shah, is to make these new requirements a “zero net cash impact”, although of course the employer will have to shell out the money and wait for reimbursement.
An Employer Retention Credit will also be available to employers who are required to fully or partially suspend operations due to the pandemic, as well as those whose gross revenue has declined by at least 50% from the same period in 2019. This credit is permanent, and would not require repayment.
There are two loan programs that can help some running businesses: the Economic Disaster Loan and the Paycheck Protection Program. EIDLs have existed since before the coronavirus pandemic, but recent legislation has increased their funding. For a business to qualify for an EIDL, it must qualify as a “small business” based on gross revenue or employee count standards established by the Small Business Administration. Racing stables, trainers and jockeys with less than $12 million in gross average annual incomes would be considered small businesses under these guidelines, Shah said.
EIDLs allow loans of up to $2 million with long repayment terms, up to 30 years. Small businesses can also apply for up to $10,000 in an emergency advance that doesn’t have to be repaid. Collateral is required for loans of $25,000 or more. Certain businesses, including farms and those that derive more than a third of their gross annual income from pari-mutuel betting (such as racetracks), would not qualify for this program.
The Paycheck Protection Program is available to businesses with 500 or fewer employees, or the self-employed. 501(c)3s would qualify. Permissible uses for these loans include payroll or overhead such as utilities, rent, or mortgages. Tax-free forgiveness of all or part of the loan is possible, depending on how the funds are spent and maintaining employee levels.
Those using employer withholding credit are not eligible for Paycheck Protection Program loans. Employers who obtain a loan under one program cannot take out a loan under the other program to cover the costs of the same business.
Shah said it appears horse owners or racing stables that don’t have payrolls because they hire trainers or pensions could qualify for EIDLs if their average gross earnings are low enough.
Trainers with employees could apply for any of the programs.
It’s unclear what programs a farm might take advantage of, but they may be able to use the Paycheck Protection Program.
Aftercare and other nonprofit organizations that are 501(c)3 can use any of the programs described.
Independent contractors or employees who work through a Form 1099 can apply for the EIDL themselves.
Racetracks may be able to participate in employee retention tax credits.
Shah encouraged the hundreds of call listeners to consult their tax or financial advisors for clarification on their individual circumstances.
“I encourage people who think they may be eligible to consider applying for these arrangements as soon as possible,” Shah said.
Employers or businesses that may qualify for more than one type of program should weigh their options to determine which is the most beneficial.
More information and application materials are available at www.sba.gov.