Recent changes have expanded and extended eligibility for the Employee Retention Tax Credit (ERC).
Beginning January 1, 2021, certain government entities, including federal credit unions, became eligible for the tax credit under the 2021 Consolidated Appropriations Act. Under the American Rescue Plan Act, the ERC has been extended from Q2 through the end of 2021.
Requirements for the ERC include:
“Have operations that were fully or partially suspended during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or Experienced a significant decline in gross receipts during the calendar quarter.”
The initial CARES Act enacted in March 2020 did not allow ERCs for any federal, state, or local governmental entity. Since federally chartered credit unions are government “instrumentalities,” they fell under this disallowance.
The availability of the ERC for small businesses has now been extended through December 2021 and allows businesses to offset their current payroll tax liabilities by up to $7,000 per employee per quarter, according to the U.S. Treasury. This credit of up to $28,000 per employee for 2021 is available to small businesses who have seen their revenues decline or even been temporarily shuttered due to COVID.
Extended through September 2021 is the availability of paid leave credits for small and mid-size businesses that offer paid leave to employees who may take leave due to illness, quarantine or caregiving, according to the U.S. Treasury. Businesses can take dollar-for-dollar tax credits equal to wages of up to $5,000 if they offer paid leave to employees who are sick or quarantining, according to the agency.
Also, employers may utilize the SBA’s Paycheck Protection Program and claim the ERC. This part of the new law is retroactive, allowing PPP recipients to retroactively claim the ERC.
Credit unions interested in exploring the ERC are strongly encouraged to consult with a tax and accounting professional to determine whether they qualify for such credits.