President Biden signed the $1.2 trillion infrastructure bill on Monday, which will invest $550 billion in transportation, broadband internet, and utilities, essentially overhauling and modernizing much of America’s infrastructure. A less talked-about aspect of the bill is the ending of the Employee Retention Tax Credit. The bill will backdate the ERTC tool to Sept. 30, 2021, instead of allowing businesses to use it through the end of the year.
As Nation’s Restaurant News has previously reported, the ERTC was part of the original CARES Act passed in March 2020 and allowed businesses to receive up to $5,000 per employee in their tax refund if they are able to prove they had a revenue reduction in 2020.
During the second stimulus round, the ERTC requirements were broadened from a gross receipts reduction of 50% to 20% and the tax credit itself was increased from 50% of $10,000 to up to 70% of $10,000 (so $7,000) per quarter. Additionally, the definition of a small business was broadened to 500 employees instead of 100.
With the ERTC ending, according to the National Law Review, “businesses will need to pay back the payroll taxes retained to monetize their anticipated credit” and there will be a 10% penalty if companies fail to deposit payroll taxes previously withheld from employees.
According to a Restaurant Hospitality interview with Bret Johnson, CEO and co-founder of tech solutions company, Clarus, while the program will end on September 30, employers actually have up to three years from the date of filing their employment tax return to actually make their claim
“We’re disappointed that Congress was short-sighted in ending the Employee Retention Tax Credit, which continues to be one of the only remaining rebuilding tool for restaurant operators,” Sean Kennedy, executive vice president of public affairs for the National Restaurant Association said in a statement. “The ERTC has been an invaluable lifeline for restaurants struggling to retain workers. We hope that Congress will reconsider and find a way to reinstate it until the end of the year.”
The National Restaurant Association sent a letter to U.S. Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig asking for them to help restaurants deal with this change with actions like speeding up the ERTC payment process and allowing businesses to defer federal income tax payments from Jan. 15, 2022, until July 15, 2022. According to the letter, restaurants, on average, remain 6.4% below pre-pandemic employment numbers.
The rest of the infrastructure bill could potentially help the challenges faced by supply chain shortages with billions invested in the electricity grid, rail lines, broadband internet, electric vehicles and transportation projects in underserved rural areas.
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