As outlined in our previous blog posts and webinars, the Employee Retention Credit (ERC) is available to certain employers with declines in gross receipts or limitations on business operations due to government orders. For 2021, the credit can be quite lucrative at a maximum of $7,000 per employee per calendar quarter.  In Revenue Procedure 2021-33, the IRS has provided new clarifications and safe harbors regarding gross receipts and other COVID relief funds including Paycheck Protection Program, Shuttered Venue Operator Grants and Restaurant Revitalization Fund.

Under one method to determine eligibility for the ERC, the employer determines the amount of decline in gross receipts compared a prior period.  Employers receiving PPP loans, Shuttered Venue Operator Grants and Restaurant Revitalization Grants have questioned if they should include these grants funds in gross receipts.  Many employers determined that if they were required to include these COVID assistance funds, they would not be eligible for the ERC and have not applied for the credits.

Within this newly provided guidance, the IRS has created a safe harbor for employers.  This safe harbor is restricted for use solely for calculating their qualification for the ERC.   Under the safe harbor, the calculation of gross receipts can exclude:

          • Forgiveness of PPP Loans
          • Shuttered Venue Operators Grants
          • Restaurant Revitalization Grants

Employers must be consistent in excluding these amounts from all ERC gross receipts calculations and for all related entities required to be considered as a single employer subject to the aggregation rules.   The safe harbor does not allow the receipts from these programs to be excluded from gross receipts for any other federal tax purposes.

How can we help? 

The ERC continues to be a sought after COVID recovery tool for small business.  If you believe your organization may qualify, contact your Mitchell Wiggins advisor for a consultation or complete this brief questionnaire and a member of our COVID response team will be in touch.