On April 29th, the SBA released its latest guidance and answers to Frequently Asked Questions (READ HERE).
Question #33 speaks to this issue: “Question: Is there existing guidance to help PPP applicants and lenders determine whether an individual employee’s principal place of residence is in the United States? Answer: PPP applicants and lenders may consider IRS regulations (26 CFR § 1.1211(b)(2)) when determining whether an individual employee’s principal place of residence is in the United States.”
IRS regulations (26 CFR § 1.1211(b)(2)) states, “(2) Principal residence. In the case of a taxpayer using more than one property as a residence, whether property is used by the taxpayer as the taxpayer’s principal residence depends upon all the facts and circumstances. If a taxpayer alternates between 2 properties, using each as a residence for successive periods of time, the property that the taxpayer uses a majority of the time during the year ordinarily will be considered the taxpayer’s principal residence. In addition to the taxpayer’s use of the property, relevant factors in determining a taxpayer’s principal residence, include, but are not limited to –
(i) The taxpayer’s place of employment;
(ii) The principal place of abode of the taxpayer’s family members;
(iii) The address listed on the taxpayer’s federal and state tax returns, driver’s license, automobile registration, and voter registration card;
(iv) The taxpayer’s mailing address for bills and correspondence;
(v) The location of the taxpayer’s banks; and
(vi) The location of religious organizations and recreational clubs with which the taxpayer is affiliated.”
While not crystal clear, this information suggests it may be permissible. The problem with this “gray area” is that the availability of PPP funds are limited, and on a first come, first served basis. Because of this, NAGA members that use H2A workers may want to consider including them in their payroll calculation. In an article for Cornell University, Washington, D.C. attorney and labor and tax law expert Chris Schulte from the CJ Lake Law Firm advised farms to include their H2A employees in their calculation of payroll. His advice was to claim the cost of their H2A payroll and be prepared to reimburse the government should the money be paid out and the employees later found ineligible. This is in light of the fact that farms can only apply for the funds once.
The fact that a person can only apply once for PPP is the most frustrating part about all of this. Many farms have already applied for PPP loans, with some of them already in receipt of their funds. Unfortunately, they were led to believe or even directly counseled by banks that they could not include their foreign workers. NAGA is seeking legal advice about the ability to amend PPP loan applications.