​American Rescue Plan Act Offers Debt Relief to Some Socially Disadvantaged Ag Borrowers

The American Rescue Plan Act of 2021 is one of nearly a half dozen COVID-19 relief bills Congress passed. The act became law on March 11, 2021, and included the $1,400 recovery rebate credits that most eligible people have already received.

There were a large number of other provisions to the American Rescue Plan, including:

• Additional funding for the SNAP food stamp program.
• Vaccine funding and COVID treatment.
• Emergency rental assistance and other housing programs.
• Payments to state, local and tribal governments.
• Specific assistance for restaurants.
• Extended unemployment benefits.
• Making up to $10,200 of unemployment benefits nontaxable.
• Additional student loan forgiveness programs.
• Expanded child tax credit and earned income credit.

There was less media coverage about a provision in the act that provided debt relief for socially disadvantaged agricultural borrowers of UDSA and USDA guaranteed loans. Previously, there were two or more debt relief programs that mainly applied to borrowers from Farm Service Agency (KeepsEagle and Pigford litigation).

The act defines socially disadvantaged persons as Native Americans, Asians, African Americans, Hawaiian, and Hispanics. Under the debt relief provision, producers with eligible indebtedness as of Jan. 1, 2021, qualify for debt relief. The debt relief will be taxable income, but the funding provides up to 20% cash to help cover the tax on the debt relief.

The USDA’s recently updated FAQ indicates that co-borrowers and entity members are also eligible. This appears to mean that a partnership or LLC with one or more Native American, African American, or Hispanic members would also be eligible if the qualifying individual is a co-borrower or has personal liability on the loan. It’s not immediately clear if the entire entity loan is eligible for debt forgiveness or only the proportionate share of the loan that applies to the socially disadvantaged members.

South Dakota has a large population of Native American farmers and ranchers, as well as some Hispanic or African American producers. The USDA fact sheet indicates that many of the loans have documented the race or cultural heritage of the borrowers on the application. Eligible borrowers are urged to contact their lenders about this program. Additional clarification is expected to be forthcoming from USDA.

If you have questions about the American Rescue Plan Act's debt forgiveness, please let us know.

This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.