Recent Expansion for The Employee Retention Credit

The recently enacted Consolidated Appropriations Act makes several modifications to the PPP and to the employee retention credit (ERC) originally provided under the CARES Act.  These modifications are retroactive to the March 27, 2020 effective date of the CARES Act.

The most significant change removes the restriction that prevents employers that obtained PPP loans from claiming the ERC.  Now, employers can claim the ERC on any eligible wages not used to support PPP loan forgiveness and any wages that could count toward both provisions can be applied to either, but not both, at the election of the employer.  The ERC itself has been extended through June 30, 2021, and increased to 70% of up to $10,0000 of qualified wages paid per quarter in 2021.  This will allow employers to claim a maximum of up to $14,000 per employee in 2021 if they are eligible in both of the first two quarters of 2021. 

These retroactive changes to the ERC create an immediate refund opportunity for many employers, and those with PPP loans should begin to review how their payroll costs might be covered by both the PPP and the ERC in order to determine which provision to apply.  Consideration should also be given to which expenditures are needed to support PPP loan forgiveness to determine how the payroll costs factor into that determination.

We will continue to keep you posted on this and more important developments.