Seasonal Employers Are Different
We just received the following comment this morning:
“Have you seen the details regarding the impact of seasonal labor? Two examples: cotton gins that incur large labor costs during fall harvest but have almost no labor now; and watermelon farmers who have large labor costs in the summer during harvest. These will qualify for large PPP’s, but won’t spend that money during the first 8 weeks. I have seen some mention of some provision related to seasonal labor, but have not seen any details. Do you have any details?”
It is likely that the SBA will classify these entities as seasonal employers (as was suggested in the comment). A seasonal employer has a separate calculation of payroll costs as follows:
- The average total monthly payments for payroll for the twelve week period beginning February 15, 2019 (not 2020), or
- At the election of the eligible recipient, March 1, 2019 and ending June 30, 2019.
The borrower can determine which method gets them the highest loan amount.
In the case of the comment’s two examples, it is likely that the cotton gin will not qualify for much of a loan.
The Watermelon farmer may qualify for a fairly large loan if most of their summer labor was incurred before June 30. If this labor cost was in the month of June, then this farmer would want to wait until about May 1 to apply for the loan since the 8 week discovery period would run through the end of June. Applying for the loan now would likely cause most of the proceeds not to be forgiven.
The Payroll Protection Program was designed to provide funds for normal labor costs that would be incurred during February 15, 2020 to June 30, 2020. If there would normally be little labor costs during that period, then the loan amount would be fairly minor.
If this applies to your situation (i.e. much of your labor cost is in the summer or fall), then make sure to review your labor costs during these periods listed above. That is all you can qualify for.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
How can I document or prove record of seasonal labor? We will have seasonal work coming up in the spring, time unknown due to weather, but late April/early May. How do I calculate that labor cost?