In response to the COVID pandemic, Congress passed the American Rescue Plan in March of this year that provided employers with the Employee Retention Credit (ERC) through the end of 2021. However, the bipartisan infrastructure bill, H.R. 3684, signed into law by President Biden on Nov. 15, generally terminates the ERC Sept. 30.
Accordingly, for most employers, it will only apply to qualified wages paid before Oct. 1, 2021. The exception is for “recovery startup businesses” that are enabled to continue to claim the ERC for wages paid before Jan. 1, 2022. For this purpose, a business qualifies as a recovery startup business if it has had average annual gross receipts of no more than $1 million over the three-year period 2018-2020 and a new trade or business was begun after Feb. 15, 2020 (a new company or an existing company that has begun a new line of business).
Employers that do not qualify as recovery startup businesses will have to repay any ERC benefits taken after September. Practitioners of these employers should watch for additional IRS guidance.
UPDATE: On Dec. 6, the IRS released guidance regarding the retroactive termination of the ERC in Notice 2021-65: