Lawmakers on both sides of the aisle want to restore a pandemic-era tax break for small businesses and nonprofits as part of a fast-moving fiscal 2022 omnibus package taking shape, after Congress stripped the benefit away for the final months of 2021. 

The Employee Retention Tax Credit Reinstatement Act is the measure that lawmakers would like to add to the FY 2022 Omnibus bill currently making its way through Congress. Following is information on the Employee Retention Tax Credit Reinstatement Act.

This bill provides for a reinstatement of the employee retention tax credit through 2021. The credit was established to compensate employers whose businesses were negatively impacted by the COVID-19 pandemic for wages paid to their employees.

Press Release Rep. Carol Miller:

WASHINGTON, D.C. – Congresswoman Carol Miller (R-WV) introduced the Employee Retention Tax Credit (ERTC) Reinstatement Act. 

“I’m pleased to lead my Ways and Means colleagues in introducing the Employee Retention Tax Credit Reinstatement Act,” said Congresswoman Carol Miller. “By reinstating the ERTC, struggling small businesses can access one of the last remaining pandemic recovery programs to receive the help they need to replenish their workforce and get back on track. As we continue to emerge from this public health emergency, we must remember that small businesses in West Virginia and across the country still need our support. I urge Congressional leaders and President Biden to pass our bill into law as soon as possible to give these businesses and employees the certainty they need.”

“Over the last year and a half I was proud to lead the bipartisan effort to establish the employee retention tax credit, which provides financial support to businesses who retain or rehire workers, rather than lay them off,” said Congresswoman Stephanie Murphy. “This provision has helped thousands of businesses and their workers recover and rebuild from the COVID-19 pandemic, and so my fellow Ways and Means colleagues and I are introducing this bipartisan legislation to ensure this program can continue and give small businesses and hardworking Americans the support they need.”

“Eliminating the Employee Retention Tax Credit was the wrong decision and hurts our small businesses who are still recovering from the economic fallout of the pandemic. We must provide certainty and predictability to American small business owners. I am proud to join my colleagues in support of this legislation and I hope to earn strong bipartisan support in the House,” said Congressman Kevin Hern. 

“From our biggest cities to our rural towns, our nation’s small businesses help our communities thrive,” said Congresswoman Sewell. “As we build back better from the COVID-19 pandemic and grow our economy, we must make supporting our small business owners a top priority. By reinstating the Employee Retention Tax Credit, this bipartisan bill will provide much needed relief to Alabama’s small businesses, helping them rehire workers lost due to the pandemic. I was proud to join my colleagues in introducing this commonsense legislation and urge swift passage!” 

Background:

Originally, to be eligible for the ERTC, business owners had to demonstrate at least a 20% decline in gross receipts in either a given quarter compared to the same quarter in 2019 or the immediately preceding quarter. Alternatively, the business owner may have been eligible if the business is subject to a full or partial suspension of business operations due to a government order. 

Specifically, for this year’s third and fourth quarters, business owners can qualify for the ERTC as a “recovery startup business” or qualify as a “severely financially distressed employer.” To claim the ERTC as a “severely financially distressed employer,” the business must have suffered at least a 90% decline in gross receipts in a specific quarter compared to the same quarter in 2019. 

The ERTC was scheduled to expire at the end of 2021, but the recently enacted Infrastructure Investment and Jobs Act disallowed this credit for the fourth quarter of 2021. Many small businesses have continued to take the tax credit into the fourth quarter, and now face a retroactive tax increase and a complex, frustrating process in reconciling the credit that they will now have to forfeit. 

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Should Congress pass H.R.6161, the Employee Retention Tax Credit Reinstatement Act as part of the coming Omnibus spending bill?