August 11, 2021
August 11, 2021
The IRS released Revenue Procedure 2021-33, which provides additional guidance on employers claiming the employee retention credit (ERC) under the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136) (CARES Act). Of note in this guidance is the inclusion of a safe harbor for determining gross receipts for purposes of qualifying for the credit. There have been questions as to whether “gross receipts” would include forgiveness amounts from Paycheck Protection Program (PPP) loans, or the amount of “ERC-Coordinated Grants” (Shuttered Venue Operator Grants or Restaurant Revitalization Grants). As Rev. Proc. 2021-23 points out, these grants may not be included in income but would be included in the definition of gross receipts under IRC Section 448 and IRC 6033 (for tax-exempt organizations).
The provision of this safe harbor allows an employer who participated in these relief programs to qualify for the ERC. These same employers were previously precluded due to the temporary increase in gross receipts from relief program participation. The employer is not required to apply for the safe harbor, but may elect it by excluding the amount of the forgiveness of a PPP Loan and the amount of ERC-coordinated grants from its gross receipts when determining eligibility to claim the ERC.
An employer may revoke the election by including the amount of PPP loan forgiveness and the amount of ERC-coordinated grants from its gross receipts when determining eligibility to claim the ERC. The employer must, however, adjust all employment tax returns that are affected by the revocation of the safe harbor election.
Absent from this guidance is the treatment of ERC amounts received as gross receipts. The AICPA has indicated that ERC amounts received are contributions for tax-exempt organizations, which would generally be included in gross receipts under IRC 6033. We will continue to monitor this issue as more guidance becomes available.
The ERC was extended to the end of 2021, however, the infrastructure bill passed by the Senate yesterday contains a provision that would end the ERC after 9/30/21. This may change as the House takes considers the bill.
For more on the ERC or other tax credits and relief programs, contact your CPA or email your question to firstname.lastname@example.org.
GRF COVID-19 Task Force