The ERC could expire early if the current version of the infrastructure bill becomes law.

A potentially lucrative but often underused Covid-19 relief tax credit is facing an early end.

The version of the infrastructure bill passed by the U.S. Senate would end the Employee Retention Credit three months earlier than planned. It’s a change that could pose a challenge for employers still coping with difficulties related to the Covid-19 pandemic, particularly in light of the Delta variant.

As we’ve noted, the ERC allows businesses that were required to close or partially suspend operations during Covid-19, or saw business fall by 50% or more, to get thousands of dollars in credits per employee. Starting in the third quarter of 2021, startup businesses also became eligible.

The program initially was scheduled to run through the end of 2021, but the current version of the infrastructure bill would end the program following the third quarter. It’s one of several ways the infrastructure bill could affect small-business programs, as we’ve previously noted. 

Troy K. Taylor, a CPA and tax director at accounting firm Dixon Hughes Goodman LLP, said the change could cost employers millions of dollars in credits for the fourth quarter.

The infrastructure bill still requires House passage and President Joe Biden’s signature, so there’s a chance the final version may not include a provision to end the ERC. Lawmakers may face pressure from business advocacy groups that are calling for more Covid-19 relief due to the impact of the Delta variant. 

The underutilization of the credit may have put the ERC in the crosshairs, but experts previously told The Business Journals that more small businesses were inquiring about the credit as initial misperceptions about the ERC’s interplay with Paycheck Protection Program loans faded.

Ty West, Senior Editor, The Business Journals
Aug 17, 2021, 10:45am EDT

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