The Employee Retention Credit (ERC) will be terminated early as a result of H.R. 3684 that passed the House of Representatives on Friday, November 5th. It was sent to the president’s desk on November 8th.
The Infrastructure Investment and Jobs Act (IIAJ) retroactively ends the ERC, making wages paid after Sept. 30, 2021, ineligible for the credit except for eligible recovery startup business. So, for wages paid in the fourth calendar quarter of 2021, the credit applies only to recovery startup businesses, and other employers can not claim the credit.
The IIAJ also modified the definition of a recovery startup business so that a recovery startup is defined as a business that began operating after February 15, 2020, and has average annual gross receipts of less than $1 million.
The American Rescue Plan Act, P.L. 117-2, enacted March 11, made the ERC available to eligible employers for wages paid during the third and fourth quarters of 2021; however, H.R. 3684 would repeal the fourth-quarter extension. The IRS issued guidance on claiming the credit in the third and fourth quarters of 2021 (Notice 2021-49).
If you have any questions about the IIAJ and if it will affect you or your business, contact us.