(“covered costs”)) the PPP loan proceeds are deemed to fund or to which covered cost the unforgiven portion of the PPP loan proceeds are deemed to fund. This raises a number of issues, including to which covered costs (payroll, rent, utilities, mortgage, etc. Moreover, an employer should qualify for an ERTC to the extent that a PPP loan amount is less than the employer’s payroll costs during the covered period. Apparently, this language means that any employer that either applies for less than 100% of a PPP loan to be forgiven or is denied forgiveness for any portion of a PPP loan may apply for and obtain an ERTC for that portion of the PPP loan proceeds that are not forgiven. The statute makes clear that the ERTC may be claimed on otherwise qualifying wages paid from PPP loan proceeds but only to the extent that the covered loan under the PPP loan program is not forgiven. The CAA includes several clarifications and technical corrections with respect to the ERTC. The CAA addresses the interaction between the ERTC and the PPP loan program.

The CAA also makes the credit available to certain governmental employers and provides rules to allow new employers with little or no 2019 history to claim the credit. An employer’s reduction in gross receipts is generally measured against the same calendar quarter from 2019, but the CAA provides for electing employers and employers not in existence in 2019 to use the preceding calendar quarter to calculate their reduction in gross receipts. The CAA also lowers the required reduction in quarterly gross receipts that may trigger ERTC eligibility to 20% (from 50% under the CARES Act). This change greatly expands the credit amount for employers with more than 100 employees. The CAA raises the threshold for treatment as a “large employer” from 100 employees to 500 employees. The CAA expands eligibility for the ERTC in a number of ways. Advance payments are generally estimated based on average quarterly wages from 2019. Eligible employers may seek advance payment of the ERTC for any calendar quarter. The CAA also increases the ERTC base to $10,000 of qualified wages per employee per calendar quarter (from $10,000 per employee in the aggregate under the CARES Act). The most significant change made by CAA to the ERTC is to extend the ERTC for qualified wages paid through J(from Decemin the CARES Act) and increases the credit base to 70% of such wages (from 50% in the CARES Act). The changes made to the ERTC can be separated between prospective and retroactive changes.įor employers with more than 100 employees, the original CARES Act allowed an ERTC but only with respect to a portion of wages.Īs originally drafted, the ERTC did not apply to any governmental employer. What constitutes qualified wages varied depending on whether the employer’s average number of employees during 2019 was more or less than 100. The CARES Act limited the credit to 50% of “qualified wages” paid to each employee (generally up to $10,000 per employee per year). A precondition to claiming the credit was that either (1) the employer’s business was either fully or partially suspended by a government order or (2) that the employer sustained a significant decline in gross receipts (very generally at least a greater than 50% decline in gross receipts for a quarter in 2020 as compared to the same quarter during 2019). Under the CARES Act, the employee retention credit allowed certain employers carrying on a trade or business to claim a tax credit computed on a calendar quarter basis as a percentage (50%) of the 6.2 percent Social Security payroll tax. The CAA extends, increases, and amends the CARES Act’s Employee Retention Tax Credit (ERTC). Certain Tax and Related Provisions Relevant to Businesses President Trump, even though dissatisfied with the additional $600 individual payment amounts (he preferred $2,000) and certain other aspects, signed into law the CAA on December 27, 2020. On December 21, 2020, Congress passed, with large bipartisan majorities, the Consolidated Appropriations Act, 2021 (CAA), an approximately $2.3T omnibus appropriations bill to fund the government through September of 2021 that includes $900B of COVID-19 relief intended to help businesses and individuals. High Net Worth Individuals and Family Offices.Treehouse: Partnership Tax Compliance & Reporting.Fractional Accounting & Advisory Services.

California Manufacturing and Research & Development Exemption.

Ppp gross receipts test