On Monday, September 13, 2021, House Ways and Committee Chairman Richard Neal released the first draft of the House Democrats’ tax legislation (including both tax increases and tax relief) they expect to consider as part of the budget reconciliation process, intended to fund key programs under President Biden’s “Build Back Better” program.
Historically, research costs have been treated very beneficially by US taxpayers. First, eligible research costs are immediately deductible. Second, if those costs meet certain other criteria, they may qualify for federal and state research credits. Some of these credits are even refundable against employee withholding taxes.
On March 11, 2021, President Biden signed into law The American Rescue Plan (ARP). A portion of this law allows both small and medium-sized employers, as well as certain governmental employers, to claim refundable tax credits to reimburse them for the cost of providing their employees with paid sick and family leave due to COVID-19.
As part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Congress provided the Employee Retention Credit (“ERC”), which provides a refundable credit by means of reducing payroll tax liability for employers who retained payroll throughout the pandemic.
On March 1, 2021, the IRS released Notice 2021-20 to provide comprehensive guidance on the Employee Retention Credit (ERC) and formalize the IRS’s FAQs, thereby allowing taxpayers to rely on the guidance for penalty prevention purposes. The notice explains the tax treatment of the ERC and, significantly, provides long-awaited instructions on how Paycheck Protection Program (PPP) loan borrowers may qualify for and claim the ERC for wages paid after March 12, 2020 and before January 1, 2021. Therefore, borrowers who can potentially claim the credit are now better positioned to proceed with applying for PPP loan forgiveness.
Restaurants are starting to rebound from the effects of COVID-19 and recent legislation introduced by Congress allows restaurants to use the Employee Retention Tax Credit. This credit can generate cashflow of up to $19,000 per employee for 2020 and the first half of 2021, providing needed liquidity and help for the struggling industry.
The $900 billion COVID Relief Package, passed by Congress on December 21, 2020 and headed to President Trump’s desk for signature, contains a number of tax provisions to assist individuals and businesses, in addition to authorizing funding for second rounds of individual stimulus payments and PPP loans.
With the current COVID-19 pandemic, many businesses have applied for Paycheck Protection Program (“PPP”) loans with the intention of applying for loan forgiveness. However, companies that received PPP loans may experience a reduction in their ability to claim both federal and state Research and Development (“R&D”) tax credits.
Businesses across industries continue to struggle during the coronavirus pandemic to ensure they can maintain adequate cash flow, meet financial obligations and keep their operations afloat. Fortunately, the federal research and development tax credit may provide refund opportunities and provide some relief during uncertain times.
As a part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) enacted on March 27th, Congress created a new employee retention credit (ERC) for businesses adversely impacted by the ongoing COVID-19 pandemic. This provision was one of several measures included in the Act which are designed to help employers retain employees during the health crisis.