The bipartisan infrastructure bill released last Sunday would end the employee retention tax credit (ERTC) that Congress created to help businesses retain employees during the COVID-19 pandemic.
A provision in the legislative package 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 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 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 Senate is planning to pass the infrastructure package before their August recess next week. The House is already on recess and is not planning to return until next month.