The one piece of good news the team sports industry has received in the past month came late last week with the Federal Government’s approval of the $2 trillion CARES Act stimulus bill, which will provide $349 billion for small business loans and tax benefits targeted to larger employers, as a result of the global coronavirus (COVID-19) pandemic.

The National Sporting Goods Association (NSGA)welcomed the bill and the relief it offers to its team dealer and retailer members.

“We are pleased to see our government leaders come to an agreement on this stimulus bill that will help so many people who are hurting as a result of the COVID-19 pandemic,”says NSGA president and CEO Matt Carlson. “The ‘Paycheck Protection Program’ provides significant relief for independent retailers and dealers in the sporting goods industry in the form of a forgivable loan.

“Sporting goods retailers of all sizes have had to close their doors in more than 20 states and other communities that have enacted stay-at-home orders,” Carlson adds. “In other areas, they have significantly reduced their hours as foot traffic has dropped considerably with the American public wisely practicing physical distancing to slow the spread of COVID-19. With so much uncertainty on how long this will disrupt our lives, it is crucial that sporting goods retailers and dealers have a way to keep their businesses running and compensate their employees.”

The SBA 7(a) emergency loans include improvements that NSGA fought for with lawmakers to ensure that sports retailers and dealers have a mechanism to keep their employees on the team, including:

• No application fee
• No collateral required
• No personal guarantees
• Applicants don't have to prove financing is unavailable elsewhere
• Allows for forgiveness of loan for eligible expenses including payroll expenses, employee benefits, rent, mortgage obligation interest and utilities.

NSGA also applauded tax credits and benefits that will help its larger retailer and dealer members and their employees. The tax credits on wages paid to employees for businesses that had to fully or partially suspend operations due to COVID-19, credits available for wages to employees when they weren’t providing services due to COVID-19 and the delayed payments on employer payroll taxes are excellent incentives for businesses to keep employees on board until the COVID-19 pandemic subsides. 

Among its other highlights of interest to team dealers:

• The bill provides a tax credit of 50 percent of the wages paid to the employee, up to $5000 per quarter. This credit is available to a business that must fully or partially suspend operations due to COVID-19 and can prove that as a result they’ve had 50 percent or greater loss in gross receipts compared to the same quarter of the last calendar year. The credit stops the quarter after the business has gross receipts greater than 80 percent of the same quarter in the previous calendar year. This tax credit expires at the end of 2020.
• If the employer has more than 100 full-time employees, the credit is available for wages paid to employees when they weren’t providing services due to COVID-19 circumstances. However, for employers with 100 or fewer full-time employees, employee wages qualify whether the employer was open for business or closed due to COVID-19. Employers can’t get both these tax credits, and a forgivable loan under the “Paycheck Protection Program.”
• The bill also allows employers and self-employed individuals to defer payment of the employer share of Social Security tax. The employer must pay 50 percent of the deferred taxes by December 31, 2021 and the remaining deferred amounts by December 31, 2022. This feature should help manage cash flow.
• The 2017 Tax Cut and Jobs Act (TCJA) accidentally excluded “qualified improvement property (QIP),” i.e. interior renovations to anon-residential building, from a 100 percent first-year bonus depreciation for property placed in service between September 28, 2017 and December 31, 2022.The CARES Act fixes this by giving QIP a normal depreciation period of 15 months as initially intended.
• The CARES Act further amended the business tax code by allowing businesses to take net operating losses (NOLs) earned in 2018, 2019, or 2020 and carry back those losses five years. In addition, the NOL limit of 80 percent of taxable income is also suspended, which means that companies can use NOLs to fully offset their taxable income.
• Finally, the net interest deduction limitation has been expanded to 50 percent of EBITDA for 2019 and 2020. This will help increase liquidity for some businesses almost immediately.

NSGA has created a COVID-19 Resources and Information page accessible at the homepage of its website and urges members to visit  nsga.org to find frequent updates with details on the NSGA proposal sent to Congress, detailed information about the important components of the stimulus bill, details about COVID-19, an interactive map with resources available from each state and business-related tips.

“When the COVID-19 health crisis ends, the American public will be eager to resume many of the sports and fitness activities it has been unable to take part in for safety reasons,” Carlson adds. “Once Americans are able to get back to action it will be important for them to have the local retailers and dealers back in action as well.”