ERTC and the Infrastructure Bill
The US Senate recently passed President Biden’s $1.2 trillion infrastructure bill, which funds plans to rebuild the nation’s transportation systems, roads, and broadband internet.
What is the Infrastructure Bill?
The bill features $550 billion in new federal spending over five years. It would allow for the major overhaul of roads, bridges, and passenger and freight rail. According to the White House, it would be the largest federal investment in public transit in history.
The bill also includes upgrades to the electric grid, expansion of broadband internet access, and building of a national network of charging infrastructure for electric vehicles. Among other priorities, the bill covers spending toward water infrastructure updates.
Before the bill can head to President Biden’s desk, it must be approved by the House.
To pay for the proposed legislation, lawmakers leaned heavily on repurposing unused COVID-19 relief funds. The bill lists savings from rescinding unobligated appropriations for certain programs, including the Paycheck Protection Program.
One of the lesser-known items of the package could possibly move up the termination date for the Employee Retention Tax Credit from the end of 2021 to September 30. If the bill passes, which seems unlikely, the ERTC would end early, saving the federal government more than $8 billion.
However, recovery startup businesses — companies that began a new trade or business after Feb. 15, 2020 with average annual gross receipts of $1 million or less — would remain eligible for the credit through the end of 2021.
What is the ERTC (Employee Retention Tax Credit)?
As part of the CARES Act, the Employee Retention Tax Credit (ERTC) is a refundable tax credit that encourages businesses to keep employees on their payroll. It’s worth up to $5,000 per employee in 2020 and up to $7,000 per employee per quarter in 2021. As well, under the recovery startup provision, small businesses can claim up to $100,000 in Q3/Q4 of 2021.
The refundable tax credit is available to both private employers and non-profit organizations that lost significant business or had to suspend operations, fully or partially, during the COVID-19 pandemic due to government restrictions.
How can employers take advantage before the end of the ERTC?
The ERTC is not like the PPP in that there isn’t a limit to the amount of funding available to businesses impacted by COVID-19. So if the ERTC ends on September 30, employers still have up to three years from the date of filing their employment tax return to make their claim. But the period of eligibility would end on September 30.