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Keeping You Informed: Covid-19 Employee Retention Credit (ERC) Facts and Resources

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Tax Incentives Proposed in Senate “HEALS Act”

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Yesterday, Senate Republicans unveiled their proposal for the next phase of COVID-19 stimulus legislation. The “HEALS Act” includes a number of new and enhanced tax incentives for employers.

The proposal is in response to the HEROES Act provisions passed by the House last month.  It is smaller in value vs. the House bill, but substantially larger than the current incentive.  We believe that the final bill will be somewhere in between the two.  We are told that the Trump administration supports the provisions in the Senate bill.

  1. Enhanced Employee Retention Credit. Like the proposed HEROES Act passed by the House, the HEALS Act seeks to increase the benefit of the retention credit passed in the CARES Act. The following matrix shows the differences between the existing provision and the two proposals:
VersionGross Receipts Decline needed to Qualify (If no government order suspension)Credit as a percentage of qualified wagesCap of qualified wagesMax CreditEligibility Regardless of Whether Employees are Providing Services.PPP Recipients Eligible?
CARES (Current Law)50%50% (Retroactive to Mar 13)$10,000 (Mar 13 to Dec 31)$5,000Under 100 EmployeesNo
HEROES (House Proposal)10%80% (Retroactive to Mar 13)$15,000/Quarter $45,000/Year$36,000Under 1,500 EmployeesYes (Except for wages subject to PPP forgiveness)
HEALS (Senate Proposal)25%65% (Retroactive to Jul 1)$10,000/Quarter $30,000/Year$18,000Under 500 EmployeesYes (Except for wages subject to PPP forgiveness)
  1. New WOTC Category for Hiring Unemployment recipients, including rehired employees.  Temporary expansion of the Work Opportunity Tax Credit. Adds a new target group for WOTC called, “Qualified 2020 COVID-19 unemployment recipients.” Employees beginning work on or after the day the bill is enacted and through 2020 could qualify for a credit of up to 50% of 10,000 of first-year qualified wages. Individuals would need to be certified by the state agencies as having received (or approved to receive) unemployment compensation for the week of or the week immediately preceding the hiring date. The limit against allowing a credit for rehires would be removed for this target group.
  1. New Safe and Healthy Workplace Credit for employee protection expenses. The bill would establish a refundable payroll tax credit equal to 50% of “qualified employee protection expenses” which include testing for COVID-19, PPE, cleaning supplies, modifications to workplaces and contactless technology that benefit employees and customers, incurred after March 12 and before January 1, 2021. The credit is capped based upon the number of employees. In each calendar quarter, the cap on qualified expenses is $1,000 for each of the first 500 employees (or $250,000 in credit); $750 for each employee between 500 and 1,000 (up to $187,500 in credit); and $500 for each employee that exceeds 1,000. This credit is in addition to the Employee Retention Tax Credit and all taxpayers may qualify, regardless of any other eligibility.

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