Risman Quoted in Hotel Business About Paycheck Protection Program Eligibility Under CARES Act for Hotel Owners Using Third-Party Payroll Providers

15 May 2020 Hotel Business News

Partner Cliff Risman was quoted in the Hotel Business article, “COVID-19 and the Law: Legal experts weigh the issues,” where he discussed the confusion among hotel owners about eligibility for the Paycheck Protection Program under the CARES Act if those hoteliers use a third-party management company to handle payroll.
“The typical domestic hotel management agreement provides that even though the hotel owner bears the ultimate financial responsibility for payroll and other employment costs via reimbursement to the management company, the manager is the legal employer of the employees and is the party that remits the payroll taxes to the taxing authority,” he said. “A number of hotel company administrative affairs people, general counsel and other executives worked to educate the SBA on this industry mechanic and the unintended result of a literal reading of the act in this context. The intent was to cause the SBA to issue guidance stating that for purposes of calculating eligible loan amounts under the PPP, the party that ultimately bore the salary and related employment costs would be deemed to have incurred those costs even though they were not the party who remitted the payroll tax.“
He added, “Ultimately, the SBA issued some guidance that was helpful even though not directly on point. As a result, single-purpose entities that owned hotels felt more comfortable applying for the PPP loans and using the employment cost information provided to them by the managers, as having been reimbursed to the managers as their employment costs for purposes of calculating eligible loan amounts.”

Risman also pointed out that applications submitted to community banks and other relatively smaller financial institutions have been processed and approved much more quickly and efficiently than those submitted to larger money center banks.

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