Today, as a result of the COVID-19 pandemic and resulting stay-at-home orders issued by the governors of most states, many employees are working remotely from home for their employers. In fact, for many employers and employees, the arrangement is working well enough that they will likely consider continuing the arrangement, on a full-time or part-time basis, when the stay-at-home orders are lifted. This type of arrangement raises all kinds of issues and concerns for employers, including compliance with applicable laws. Many of the issues are obvious, but some of them are more nuanced and may not be on the minds of employers.
Employees Working Remotely
The trap is set when an employer has an employee performing services outside of the state(s) where it operates. Historically, this scenario was likely rare. It probably only occurred when an employer was physically located near a state border and had an employee working from his or her home located in the neighboring state. Today, with the internet and sophisticated communication technologies, it is not limited to employees residing in neighboring states. Further, with the COVID-19 pandemic facing the world, more and more employees are working remotely. Assuming a remote work arrangement is acceptable to both an employer and an employee, I suspect it will continue to be a prevalent employment arrangement post-COVID-19. As a result, employers may find themselves with employees working in states, and possibly countries, different from where the employer has its business physically located. As discussed below, it is vital that employers know where their employers are performing services. The consequences of not knowing where your employees are working could be costly.
In addition to worrying about keeping their business afloat these days, businesses are focusing on whether their Paycheck Protection Program (“PPP”) loan will be forgiven. Without loan forgiveness, many of these businesses will not survive. Consequently, the stakes are high!
The eligibility requirements for PPP loan forgiveness are complex. As we discussed previously, in large part, loan forgiveness is based on the borrower using the loan proceeds within the eight-week period immediately following receipt of the loan on specified expenses, including payroll and rent.
Some landlords have been generous enough to reduce or even abate rent for a period (e.g., three months) to assist the tenant in salvaging its business. Consequently, these businesses may have little or no rent to pay during the eight-week period. If a business owner asks the landlord for advice on what to do in this situation, the landlord will likely say:
Love thy landlord – pay me anyway!
Whether the prepayment of rent (or the payment of rent for a period preceding the eight-week period) applies for purposes of the loan forgiveness computation under the PPP is likely a question being pondered by many businesses and their advisors.
Larry J. Brant
Larry J. Brant is a Shareholder in Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; and Beijing, China. Mr. Brant practices in the Portland office. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
Upcoming Speaking Engagements
- “The Road Between Subchapter C and Subchapter S – It May Be a Well-Traveled Two-Way Thoroughfare, But It Isn’t Free of Potholes and Obstacles,” Portland Tax ForumVirtual Event, 9.24.20
- “The Road Between Subchapter C and Subchapter S – It May Be a Well-Traveled Two-Way Thoroughfare, But It Isn’t Free of Potholes and Obstacles,” Oregon Association of Tax ConsultantsBeaverton, OR, To be rescheduled
- To be rescheduled