Infrastructure Bill Would End the Employee Retention Credit

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MitchReitman
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The infrastructure bill passed by the U.S. Senate on August 10, 2021 would end the employee retention credit (ERC) early, making wages paid after Sept. 30, 2021, ineligible for the credit (except for wages paid by an eligible recovery startup business).

Many businesses have taken advantage of the  ERC, which was created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136,.  The American Rescue Plan Act, P.L. 117-2, enacted March 11, made the ERC available to eligible employers for wages paid during the third and fourth quarters of 2021; however, the proposed House Infrastructure Bill (H.R. 3684)  The ERC allows eligible employers to take credits against payroll taxes in an amount equal to 50% of the first $10,000 of quarterly wages paid to certain employees.  The amount was increased to 70% of the first $10,000 of quarterly wages for 2021.

If the Credit exceeds the employer’s tax liability it is refundable, meaning that the company could either apply it to future periods or opt to receive a check for the amount.  H.R. 3684 would repeal that extension. The IRS issued guidance last week on claiming the credit in the third and fourth quarters of 2021 (Notice 2021-49), but noted in that guidance that it is watching this legislative development.

We have assisted numerous clients in obtaining over $10 million in ERC’s and will monitor the affect of the Bill closely.

Mitch Reitman is the Managing Principal of Reitman Consulting Goup.  He can be reached at MReitman@Reitman.US.