Infrastructure Bill Proposes Early End for ERC

Text of the bipartisan Senate infrastructure bill was finalized over the weekend. The 2,702 page bill includes funding for roads, bridges, and airports, but one of the challenges in crafting the legislation has been figuring out how to pay for it.

Section 80604 of the bill seeks to cover part of the cost by ending the Employee Retention Tax Credit at the end of September. The ERC was originally legislated as part of the CARES Act in March 2020, and in its original form would have ended on December 31, 2020. The Consolidated Appropriations Act passed last December extended the ERC for the first two calendar quarters of 2021. Then the American Rescue Plan passed in March of this year extended the ERC yet again through the end of 2021.

The bill would, however, retain one aspect of the ERC through the fourth quarter: the new recovery startup business credit which provides up to $50,000 of ERC in both the third and fourth quarters for businesses that started after February 15, 2020. As we have noted before, the IRS has yet to clarify some of the important mechanics of this credit despite the fact that it went into effect at the beginning of July.

According to the Washington Post: “The Senate’s move to abruptly end the tax cut demonstrates how lawmakers have struggled to deliver relief to business during the pandemic. It also shows how changing rules and complicated paperwork have baffled small business owners, and made it hard for them to access relief money from tax cuts and the forgivable Paycheck Protection Program loans.”

The bill is still subject to amendment in the Senate and then must also be passed by the House before becoming law.

Learn more about the Employee Retention Credit (ERC).

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