Potential Changes to Employee Retention Tax Credit

Congress is considering ending the Employee Retention Tax Credit (ERTC) to help offset some costs of the bipartisan infrastructure plan. The proposal was included in the Infrastructure Investment and Jobs Act recently passed by the Senate. The legislation is now pending in the House of Representatives.

The ERTC is a payroll tax credit created to help businesses partially offset the costs of keeping employees on payroll and on employer-sponsored health insurance during the pandemic. The provision was initially implemented by the CARES Act from March 13, 2020, through December 31, 2021, for eligible employers. The ERTC was extended and modified in subsequent COVID-19 relief legislation through December 31, 2021. Apparently, many small businesses have not elected to take the ERTC, opting instead to seek assistance through the more popular Paycheck Protection Program.

The provision in the Senate-passed infrastructure bill proposes to sunset the ERTC after September 30, 2021 – essentially three months early. The tax break would remain available until the end of 2021 for a narrow group of eligible entities known as recovery start-up businesses.

Meanwhile, the Internal Revenue Service and the Treasury Department recently released guidance on the employee retention tax credit. The IRS and the Treasury guidance in Notice 2021-49 addresses various issues regarding the application of the employee retention credit in both 2020 and 2021, building on earlier guidance in Notice 2021-20 and Notice 2021-23. NAMM will continue to monitor this issue and will post updates here as they are available.