The bipartisan infrastructure bill introduced in the Senate earlier this week includes a provision that would end early the employee retention credit, which was codified in Section 3134 of the Internal Revenue Code by the American Recovery Plan Act earlier this year.  The Section 3134 credit, which took effect on July 1 but mirrors the credit originally adopted in the CARES Act and enhanced last December, is currently scheduled to expire at the end of 2021.  However, the infrastructure bill would preclude employers, other than Startup Recovery Businesses established during the COVID-19 Pandemic, from claiming the credit for wages paid after the end of the third quarter.  Startup Recovery Businesses would remain eligible for the credit through the end of 2021.

According to the Joint Committee on Taxation, the early termination of the credit is expected to save $8.2 billion.  To remain eligible for the credit in the fourth quarter, employers generally must experience a 20% decline in quarterly gross receipts in the third or fourth quarter of 2021 compared to the same quarter in 2019 or continue to experience full or partial suspension of their trade or business.  We will continue to monitor the legislation to see if the provision is included in the final bill.

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Photo of S. Michael Chittenden S. Michael Chittenden

Michael Chittenden practices in the areas of tax and employee benefits with a focus on the Foreign Account Tax Compliance Act (FATCA), information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2, 1042, and 1042-S) and withholding, payroll taxes, and fringe benefits. Mr. Chittenden…

Michael Chittenden practices in the areas of tax and employee benefits with a focus on the Foreign Account Tax Compliance Act (FATCA), information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2, 1042, and 1042-S) and withholding, payroll taxes, and fringe benefits. Mr. Chittenden advises companies on their obligations under FATCA and assists in the development of comprehensive FATCA and Chapter 3 (nonresident alien reporting and withholding) compliance programs.

Mr. Chittenden advises large employers on their employment tax obligations, including the special FICA and FUTA rules for nonqualified deferred compensation, the successor employer rules, the voluntary correction of employment tax mistakes, and the abatement of late deposit and information reporting penalties. In addition, he has also advised large insurance companies and employers on the Affordable Care Act reporting requirements in Sections 6055 and 6056, and advised clients on the application of section 6050W (Form 1099-K reporting), including its application to third-party payment networks.

Mr. Chittenden counsels clients on mobile workforce issues including state income tax withholding for mobile employees and expatriate and inpatriate taxation and reporting.

Mr. Chittenden is a frequent commentator on information withholding, payroll taxes, and fringe benefits and regularly gives presentations on the compliance burdens for companies.