What is ERC? The Deep Dive

ERC. Short & Simple 

The Employee Retention Credit (ERC) is a payroll tax refund from the United States Treasury Department applicable to businesses who kept employees on payroll during the pandemic. 

• No ERC is not a loan.  It is a refund.
• Yes, the cash can be used for any purpose.
• Yes, you can have previously had a PPP loan forgiven.

ERC. The Deep Dive 

• The ERC is a refundable payroll tax credit that was originally introduced in section 2301 of H.R. 748, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), on March 27, 2020.
• The original legislation set the ERC Program to expire on December 31, 2020.
• New life was breathed into the ERC Program when on December 27, 2020, the ERC Program was significantly enhanced and extended to June 30, 2021, by the Consolidated Appropriations Act of 2021 (CAA).
• The changes and enhancements passed by the CAA effectively created two different sets of rules, one for wages paid to employees in 2020, and another set of rules for wages paid to employees in 2021.
• The ERC Program was further extended to December 31, 2021, by the American Rescue Plan Act (ARPA).
• The ERC Program was then retroactively repealed as it applies to the fourth quarter of calendar year 2021 by the Infrastructure Investment and Jobs Act (Infrastructure Bill). This is why today companies can only claim three quarters of refunds for calendar year 2021 (3 X $7,000 = $21,000) per employee and not four.
• In addition to the statutory text, the IRS has since released nearly 100 FAQs on its website, four official Notices totaling 165 pages, and one Revenue Procedure.
• The Joint Committee on Taxation (the JTC) also released its own commentary on the ERC Program in April 2020.