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.