Infrastructure Legislation Will End the Employee Retention Credit Early

On November 5, 2021, the House of Representatives passed H.R. 3684, a $1.2 trillion infrastructure package known as the Infrastructure Investment and Jobs Act. While the bulk of the legislation authorizes investments in the country’s infrastructure, it does include a few tax provisions designed to offset the cost of the investments.

The most notable of these provisions for Kreischer Miller’s clients involves the Employee Retention Credit (ERC). The infrastructure bill includes a provision that will end the ERC for many businesses after September 30, 2021, as opposed to December 31, 2021 as previously authorized.

Once the infrastructure legislation is signed by President Biden, it will repeal the ERC for Q4 2021. The tax credit will be considered terminated as of October 1, 2021 (with an exception for eligible recovery startup businesses), making wages paid after September 30, 2021 ineligible for the credit. The third quarter Form 941, Employer’s Quarterly Federal Tax Return, will be the final quarter eligible to be amended.

The ERC was originally created by the CARES Act and amended by the Consolidated Appropriations Act of 2021. The American Rescue Plan Act extended the ERC’s availability to Q3 and Q4 2021, but the infrastructure legislation will now repeal the Q4 extension.

We expect the IRS to issue additional guidance on the ERC after the infrastructure legislation is signed into law by President Biden.

We will continue to monitor these developments and provide updates as they become available. If you have any questions about these or any other tax matters, please contact your Kreischer Miller relationship professional or any member of our Tax Strategies team.

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