As COVID-19 continues to affect the balance sheet of floral industry businesses, SAF reached out to Congressional leadership this week to highlight one more ripple effect: customer credit defaults.
A coalition of associations representing wholesalers across various industries joined forces to send a letter to the Hill asking Congressional leaders to prioritize legislation that would take into account the suddenly high volume of customer defaults on credit sales. Many customers buy inventory or input materials on short-term credit terms, particularly businesses in the industries hit hardest by the COVID-19 crisis, such as restaurants, retailers, and venues for sport, events, and entertainment. Current law does not contemplate the abrupt and unexpected halt in a high volume of payments for these credit sales all at once. For floral industry wholesalers, the impact is even more acute because the timing of COVID-19 coincided with payments for Valentine’s Day orders coming due.
The letter reads in part:
“Over a broader period of time, section 166 of the tax code addresses this situation by allowing a deduction for wholly worthless debts or “bad debts.” However, the terms and timing of this provision allow it to be used only under certain circumstances – businesses must meet a nuanced facts-and-circumstances test that may take many years, and in some cases, may not be satisfied until a customer in default has reached a bankruptcy settlement.
Given the current public health and economic crisis, the value of this provision is severely limited in the event of the sort of sudden shock businesses face right now. Businesses selling inventory goods and input materials on credit are experiencing mounting defaults, and they will continue to experience defaults for months to come.
The undersigned businesses respectfully request that Congress pass a temporary legislative modification to account for this unforeseen event by loosening the facts-and-circumstances test on bad debt business deductions and accelerating these deductions into the present taxable year.”
Thirty associations signed the letter, including the National Restaurant Association, National Association of Wholesaler-Distributors, National Beer Wholesalers Association, the Aluminum Association, the Produce Marketing Association and the Wholesale Florist & Florist Supplier Association.
Stay tuned to SAF Now for further updates as SAF continues to advocate on behalf of wholesalers on this issue.
Katie Butler is the senior vice president of the Society of American Florists.
