Employee Retention Tax Credit Revised Guidance and New Legislation Introduced:
The IRS recently reversed its previous guidance and will now allow employers to treat qualified health expenses as qualified wages under the COVID Employee Retention Credit. You can view more on the IRS FAQs here.
Also today, U.S. Representatives Stephanie Murphy (D-Fla.), John Katko (R-N.Y.), Suzan DelBene (D-Wash.), Brian Fitzpatrick (R-Pa.), and Chris Pappas (D-N.H.), introduced legislation to enhance the employee retention tax credit (ERTC), and are pushing for the proposal to be included in the next COVID-19 relief legislation. The full text of the bill can be found here. A one-page fact sheet on the bill can be found here. The Jumpstarting Our Businesses’ Success Credit (JOBS Credit) Act of 2020, would make a number of targeted improvements to the ERTC to better fulfill its goal of keeping workers connected to their jobs during this crisis. The changes include:
Increasing the credit percentage from 50 percent to 80 percent of qualified wages;
Increasing the per-employee limitation from $10,000 for all calendar quarters to $15,000 per calendar quarter (and an aggregate of $45,000 for all calendar quarters);
Changing the threshold for treatment as a large employer from employers having more than 100 employees to employers having more than 1,500 employees (based on the average number of full-time employees in 2019) or having gross receipts above $41.5 million in 2019;
Making it easier for employers to qualify for the credit by phasing in the credit, so that employers who have experienced more than a 20 percent decline in gross receipts can claim a portion of the credit;
Clarifying that “qualified wages” include qualified health benefits and that employers who continue providing such benefits to their employees qualify for the ERTC even if they do not continue paying other qualifying wages;
Allowing state, territory, and tribal governmental employers (and any political subdivision, agency, or instrumentality of these entities) to claim the credit if these employers retain employees notwithstanding the closure of their operations; and
Improving coordination between the ERTC and the Paycheck Protection Program so employers can be eligible for both programs, but with guardrails in place to prevent “double dipping.”
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