April 27, 2020

Resources to Assist Ohio Manufacturers through the COVID-19 Pandemic

By Jon Shoop, Office Managing Partner, Downtown Cleveland

Resources to Assist Ohio Manufacturers through the COVID-19 Pandemic State & Local Tax

Most businesses have been economically impacted by the coronavirus (COVID-19) pandemic – some much worse than others. Manufacturing has been among the hardest hit industries affected. At the same time, there have been a number of regional manufacturers who have stepped up to provide face shields, masks and other solutions to help combat the crisis, sustaining revenue streams or creating new ones in the process.

The historic $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act provides relief to U.S. businesses through loan forgiveness programs, tax credits and a number of other measures. More recently, additional funding was approved by Congress to assist small business owners.

Ohio manufacturers can offset negative consequences of the economic downturn stemming from the crisis by understanding and taking advantage of these measures. The following information provides a highlight of these federal provisions as well as key Ohio programs created to assist the manufacturing industry.

Medical Supply Chain

Given the decrease in output from foreign manufacturers, the CARES Act creates a task force to eliminate redundancies in the American medical supply chain and to promote domestic manufacturing. The intent is to encourage more manufacturers to produce needed medical equipment, such as ventilators and personal protection equipment (PPE). The Act also includes $10 million for the USPS’ last-mile delivery of medical equipment, which is critical to providing U.S. products to consumers who are sheltering at home.

On the state level, Gov. Mike DeWine announced the Ohio Manufacturing Alliance to Fight COVID-19, a public-private coalition of manufacturing and healthcare associations specifically organized to address the shortage of equipment and PPE in the state. For example, the OMA has pledged to make up to one million face shields. Many manufacturers have contacted the state to see how they can respond to need of hospital systems to manage the surge of COVID-19 cases. The coalition includes:

  • Ohio Manufacturers Association
  • Ohio Manufacturing Extension Partnership
  • JobsOhio
  • Manufacturing Advocacy and Growth Network
  • Ohio Hospital Association

Additionally, Ohio nursing homes formed an alliance to help guide manufacturers on which items are most needed. Already, Ohio manufacturers have worked to provide PPE alternatives to help address the shortage of needed supplies.

The CARES Act also provides $8 billion for cargo airlines and $3 billion for airline contactors to keep workers and maintain lower shipping rates. The funding includes payroll support, loan guarantees and loan programs that will help manufacturers ship products at affordable rates throughout the pandemic.

Funding for Manufacturer Innovation

The CARES Act includes $50 million for innovative companies that promote an effective private industry response to the pandemic, including the production of supplies, employee training and realignment of facilities to accommodate production. The funds will be distributed as grants. Ohio manufacturers can apply for a portion of this funding through the Hollings Manufacturing Extension Partnership (MEP) under the NIST Manufacturing USA National Emergency Assistance Program.

Small Business Assistance

SBA Payroll Protection Program Loan Programs

The CARES Act funded the Payroll Protection Program (PPP) with $349 billion on March 27 to help small businesses adversely affected by the pandemic. Due to high demand, this funding was depleted within two weeks. On April 24, the president signed the Paycheck Protection Program and Health Care Enhancement Act (the “Enhancement Act”) to provide an additional $370 billion in additional assistance for small businesses.

Marcum is recommending that clients take steps now to assemble the required documentation for loan applications and, potentially, submit applications to banks accepting them in anticipation of additional funding. See Lender Application Form – PPP Loan Guaranty for more information.

Forgivable Loans

The Act provides an additional $320 million in low-interest Small Business Administration (SBA) loans to companies with up to 500 employees. Companies meeting the requirements can receive loans of up to $10 million. If the funds are used for payroll, payroll taxes, mortgage payments, rent and utilities, the loan is completely forgiven. As of this posting, Congress is working to add funds to the loan programs.

Economic Injury Disaster Loans (EIDLs)

The Act added $50 million to the $10 million EIDL loan program, which provides working capital loans for small businesses affected by COVID-19. The loans are capped at $2 million at an interest rate of 3.75%. EIDL loans are only available to businesses without credit elsewhere, such as existing lines of credit. For addition details, please see this article. Applications already filed will continue to be processed on a first-come, first-served basis.

Payroll Tax Deferral

Manufacturers of any size can defer payment of the employer portion of the Social Security taxes (6.2% of wages) otherwise owed for wages paid March 12, 2020, through December 31, 2020. The payroll tax deferral equates to an interest-free loan, with the first 50% due and payable on December 31, 2021, and the balance deferred until December 31, 2022. Note: Employers can still defer these costs if they have taken out a PPP loan, through the date the loan is forgiven.

Employee Retention Tax Credit

The CARES Act includes fully refundable Employee Retention Tax Credits for businesses of all sizes, equal to 50% of up to $10,000 of qualified wages per employee in a calendar quarter (including qualified health plan expenses). The maximum credit is $5,000 ($10,000 qualified wages x 50%) per quarter per employee.

Low-Interest Loan Program

The CARES Act also created a $450 billion fund to provide low-interest loans to distressed businesses affected by the COVID-19 crisis, with 500 to 10,000 employees. This loan is meant to incentivize employers to keep employees in their jobs during the crisis and to keep jobs in the U.S.

Looking Ahead

Each of the programs described above includes specific rules and application details. You will need to work with your business and tax advisor to determine which program can best serve your immediate and long-term needs.

For questions about these programs, or assistance with strategic planning for your Ohio manufacturing business, contact Jon Shoop at 216.242.0820 or email Jon.

Coronavirus Resource Center

Have more questions about the impact of the coronavirus on your business? Visit Marcum’s Coronavirus Resource Center for up-to-date information.