COVID-19 Resources

New Stimulus Package (Consolidated Appropriations Act) Includes an Expansion of the Employee Retention Tax Credit

Written by Adam West, Van Trefethen on December 28, 2020

Warren Averett consolidated appropriations ertc image

The Consolidated Appropriations Act of 2021 (the Act) was signed into law by President Trump on December 27, 2020. While the Act contains many favorable provisions, businesses should be made aware of the Act’s updates to the Employee Retention Tax Credit (ERTC).

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed into law on March 27, 2020, did not allow employers to both obtain a PPP loan and claim the ERTC. The Act provides a much-welcomed modification to the CARES Act by now allowing eligible employers to claim the ERTC, even if they have received a PPP loan.

Details of the new and expanded ERTC are outlined below.

  • Employers who receive PPP loans may still qualify for the ERTC, as long as the wages aren’t used for PPP forgiveness.
  • The ERTC originally applied to wages paid between March 12, 2020 and December 31, 2020. Under the Act, the period is extended to July 1, 2021.
  • For wages paid between January 1, 2021 and before July 1, 2021:
    • The credit is increased from 50% to 70% of qualified wages
    • Each employee’s allowable wage amount increases from $10,000 per year to $10,000 per quarter
  • The Act increases eligibility by reducing the required gross receipt decline from 50% to 20% and provides safe harbor allowing employers to use prior quarter gross receipts to determine eligibility.

The Act also requires the IRS to conduct a “Public Awareness Campaign” notifying all employers with no more than 500 employees of the availability of the credit and the requirements for eligibility to claim the credit.

Warren Averett will continue to keep you informed as information is made available. If you have questions about how these provisions impact your business, please reach out to your Warren Averett advisor, or have a member of our team reach out to you.

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This article was originally published on December 22, 2020 and was most recently updated on December 28, 2020.

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