Employee Retention Credit Update

The U.S. Senate recently passed a new infrastructure bill that could mean a potential early end to the Employee Retention Credit (ERC). The ERC was originally part of the CARES Act passed in March 2020 and allows eligible employers the opportunity to claim a payroll tax refund of up to $5,000 per employee in 2020 and up to $7,000 per employee per quarter in 2021. Under current law, the credit is available through the end of 2021.

The infrastructure bill is currently in the House and is expected to be voted on in the coming months. If the bill is passed as is, the eligibility period for the ERC would end on September 30, 2021, for most businesses. This change would not impact an employer’s ability to file a claim for the credit after such date with respect to qualifying wages paid before October 1, 2021.

Although the deadline may get moved up, the bill does not change the qualification requirements. For 2020, employers who saw a more than 50% reduction in quarterly gross receipts compared to the same quarter in 2019 will qualify, as will any employer who had a full or partial suspension in operations due to a government order. In 2021, the reduction in receipts requirement is reduced to only a more than 20% decline compared to the same 2019 quarter.