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Infrastructure bill nixes employee retention credit for Q4

Employers who held back funds for wages paid in Oct/Nov will have to pay it back

This Monday, President Biden will sign the infrastructure bill into law with some hoopla – a bipartisan ceremony celebrating the truce, as votes for the bill came from both sides of the aisle. The $1 trillion Infrastructure Investment and Jobs Act invests $550 billion of new federal spending over what Congress had already planned to allocate into a range of components that form America’s infrastructure including roads, bridges, buses, ferries, airports, railway systems, ports of entry, internet access, a network of electric vehicle charging station, plus the removal of lead pipes to improve the quality of drinking water.

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“The President will be joined by Members of Congress who helped write this landmark economic growth bill and by a diverse group of leaders who fought for its passage across the country, ranging from Governors and Mayors of both parties to labor union and business leaders,” said a statement from the White House briefing room on November 10.

But a less flashy aftershock of the bill for businesses fighting their way back from pandemic fallout is the end of the employee retention tax credit (ERTC). Employers who experienced a decline in business because of Covid-19 will no longer be able to claim the credit on wages paid after Sept. 30, 2021. That means funds employers might have held back by reducing employment tax deposits for October and November wages must now be paid. It’s not yet clear if these businesses will be charged interest and late deposit penalties under Section 6656 of the code, or if the IRS will waive the additional fees.

There is one exception: eligible startup recovery businesses will still be allowed to claim the ERTC until the end of December 2021. Qualifying businesses are defined as those that began to conduct trade or business after Feb. 15, 2020, with average annual gross receipts that didn’t exceed $1 million.

The part of the bill that discusses the ERTC is Section 80604, which amends the Internal Revenue Code’s Section 3134 to terminate the credit. The employee retention credit was put in place as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in April 2020. The credit’s life span has been extended twice, first as part of the Consolidated Appropriations Act and a second time as part of the American Rescue Plan Act.

The Infrastructure Investment and Jobs Act was approved by the House of Representatives on Nov. 5 by a vote of 228 to 206. In August, the Senate passed the legislation with a vote of 69 to 30.

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