08/19/2021

Group Says Ending ERTC Early Could Overtax IRS

The bill would end it on Sept. 30 instead of Dec. 31

A provision in the Senate-passed infrastructure bill to end the employee retention tax credit (ERTC) after September will put strain on an already under-resourced Internal Revenue Service (IRS), according to the Professional Managers Association (PMA).

The bill would end the ERTC on Sept. 30 instead of the current Dec. 31 expiration date, raising an estimated $8.2 billion to help offset a portion of the cost of the $1 trillion infrastructure deal. Certain businesses that were created during the pandemic would still be able to use the tax credit for wages paid through the end of the year.

The proposal would force the IRS to reprogram software, revise tax forms and publications and issue new guidance, Chad Hooper, PMA's executive director, told Bloomberg BNA. The PMA represents the interests of professional managers, management officials and non-bargaining employees in the federal government.

The ERTC is a refundable tax credit equal to 50 percent of payroll-related costs up to a maximum credit of $5,000 per employee for 2020 and $7,000 per employee per quarter for the first two quarters of 2021. The credit was initially established by the CARES Act in March 2020 and was later expanded through subsequent COVID relief laws. The $1.9 trillion bill President Joe Biden signed in March extended the tax credit from June 30 to Dec. 31.

While many associations and nonprofit organizations took advantage of other federal assistance programs such as the Paycheck Protection Program (PPP) to stay afloat during the pandemic, the ERTC was less utilized, although it offered substantial liquidity potential for many businesses without a loan application or loan forgiveness process. Congress also expanded the credit to include companies previously ineligible for the ERTC because they obtained a PPP loan.

The House still has not voted on the infrastructure bill but is ending its recess and returning to Washington next week.

This article was provided to OSAP by ASAE's Power of A and Inroads.