The bipartisan Infrastructure Investment and Jobs Act of 2021 (H.R. 3684), which passed the Senate in August with 69 votes, includes the early termination of the Employee Retention Tax Credit (ERC) on September 30, 2021. At the time of the bill’s passage, Senators thought the program was underutilized and estimated they could save $8 billion by terminating the program early to use the funds toward infrastructure. Since the bill has yet to pass the House, any future passage would result in a retroactive elimination of the tax credit for businesses. The bill cannot be practically changed because amendments in the House would need to be agreed to again by at least 60 Senators.
Moderate House Democrats have been advocating for immediate passage of the infrastructure bill, but, “a majority of liberal lawmakers would oppose the bill until the Senate passed the second, far larger package, which is expected to carry the climate, child care and health care provisions they have championed,” according to the New York Times. This second package, the Build Back Better plan, is also commonly referred to as the “reconciliation” bill.
On October 14, a group of 17 members of Congress signed a letter to Speaker Nancy Pelosi in which they wrote, “To end the ERTC prematurely would not only jeopardize the earnings of the tens of millions of Americans employed by small businesses, but also pull the rug out from under small businessowners who expected, reasonably, that the credit would be available until the end of 2021.”
Given the fact that there is virtually no chance of amending the infrastructure bill to maintain the ERC status quo, there appear to be three possible outcomes for ERC in the fourth quarter of 2021:
- Congress fails to pass President Biden’s legislative agenda and neither the infrastructure bill nor the Build Back Better plan become law. In this scenario, ERC is preserved for the fourth quarter as the status quo.
- Congress passes the infrastructure bill including it’s cancelation of the ERC in the fourth quarter, but restores the credit in a simultaneous BBB reconciliation bill.
- Congress passes the infrastructure bill, but either does not pass the BBB, or does so without a restoration of the ERC. In this last scenario, the fourth quarter of ERC will be canceled retroactively to September 30.
These members of Congress are apparently advocating for option number 2.