Tax Monitor

PPP Treatment Of Past Size Certifications That Excluded Non-U.S. Employees 

May 18, 2020

By: Mark A. Mangano

The Small Business Administration clarified the treatment of borrowers that submitted size certifications that excluded the non-U.S. employees of the borrower and its foreign affiliates under the Paycheck Protection Program (PPP). On May 18, 2020, the Treasury Department (Treasury) issued its twelfth interim final rule on the PPP: “Business Loan Program Temporary Changes; Paycheck Protection Program - Treatment of Entities with Foreign Affiliates” (IFR).

On May 5, 2020, Treasury published Question 44 of the Paycheck Protection Program Loans Frequently Asked Questions. The response to Question 44 declared that for purposes of the PPP’s 500 or fewer employee size standard, an applicant must count all of its employees and the employees of its U.S. and foreign affiliates, absent a waiver of or exception to the affiliation rules. Any entity that, together with its domestic and foreign affiliates, does not meet the 500-employee or other applicable PPP size standard is therefore ineligible for a PPP loan.

In the IFR Treasury acknowledge potential confusion by borrowers. The IFR provides that for a borrower that prior to May 5, 2020 incorrectly certified that it met the employee size limit eligibility criteria due to a failure to count the non-U.S. employees of the borrower and its affiliates but had no more than 500 employees whose principal place of residence is in the United States would not be deemed to be ineligible or to have made an inaccurate certification of eligibility solely on that basis.

The IFR reminds borrowers that under no circumstances may PPP funds be used to support non-U.S. workers or operations.