The Infrastructure Package’s Effect on the Employee Retention Credit

On November 5^th, the House of Representatives passed the $550 billion infrastructure package, almost three months after the Senate approved the same proposal.  Now, the infrastructure bill will go to President Biden for signature. 

Upon enactment, the employee retention credit (ERC) will no longer be available, other than for recovery startup businesses, for qualifying wages plus health insurance paid after September 30, 2021.  The maximum credit that any one employee will be able to generate for a qualifying business in 2021 will be $21,000 (or $7,000 per quarter for each of the first three quarters of the year).

A couple reminders:

• To qualify for the ERC, an employer’s quarterly revenues in 2021 must be at least 20% lower than the same quarter in 2019.  The credit is equal to 70% of the employees’ qualifying wages plus health insurance.
• As alluded to above, the credit is capped at $7,000 per quarter.
• A recovery startup business is defined as a business that began operations after February 15, 2020, and for which the average annual gross receipts do not exceed $1 million for the three-taxable-year period ending with the year that precedes the calendar quarter for which the credit is determined.

Main takeaways:

• Employers need to ensure that their fourth quarter payroll tax deposits are made timely.
• Recovery startup businesses would still qualify to claim the credit for the fourth quarter of 2021. 
• A second potential proposal covering “human” infrastructure is rumored, which may reinstate the ERC for the remainder of the year, but there is no guarantee that such a proposal will happen.

Thanks to colleagues Jennifer Rohen, Chris Hesse and Paul Neiffer for their contributions to this blog post.