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1 1 (May 07, 2020)

handle is hein.crs/govdacv0001 and id is 1 raw text is: COVID-19: The Employee Retention Tax Credit Updated May 7, 2020 The Coronavius Aid, Relief, and Economic Security (CARES)Act (P.L. 116-136) includes an employee retention payroll tax credit intcnded to help businesses rctain empioyees during the Coronavirus disease 2019, or COVID- 19, public health emergency. Employee retention remains a policy concern, as a number of economic sectors have announced lax offs resulting from the COVID-19 induced economic fallout. Uncimployment insurance claims have surged following these widespread layoffs. This Insight summarizes the employee retention tax credit in the CARES Act, makes comparisons to previous employee retention tax credits enacted as disaster tax relief, and highlights some economic and policy considerations. The Employee Retention Tax Credit The employce retention ta, crcdit (ERI C) allows eligible employers to claim a payroll tax credit of up to $5,000 per employee for qualified wages paid while closed or having reduced operations due to COVID- 19. The credit is computed as 50% of up to $10,000 in qualified wages paid to an eligible employee. (Eligible employees are generally those who have been employed by the employer for at least 30 days.) Health plan expenses can be treated as qualified wages when computing the credit. The Internal Revenue Service (IRS) has indicated that for larger employers, licalth plan cxpenscs are oly cligible for the ta, credit if the empioyce is paid wages during the time services are not provided. Lawmakers from the tax- writing committees, in a letter to the Treasury, stated that this interpretation is inconsistent with congressional intent. The credit can be taken for wages paid after March 12, 2020, and before January 1, 2021. Eligible employers are those who (1) are required to fully or partially suspend operations due to a COVID-19-related order (including nonprofit employers); or (2) have gross receipts 50% less than gross receipts in the same quarter in the prior calendar year (with the credit no longer being available once gross receipts are 80% of prior year calendar quarter gross receipts). Qualified wages depend on the number of employees the employer had during 2019. If the employer had more than 100 full-time employees, qualified wages are wages paid when employee services are not provided. (Qualified wages are limited to the amount the employee would have been paid for working an equivalent duration during the 30 days preceding the non-service period). If the employer had 100 or Congressional Research Service https://crsreports.congress.gov IN11299 CRS tNStGHT Prepared for r-e-e-s and C o m itt es:.t Cotg r s s .. ... ... .. ... ... .. ... .. ... ... .. ... .. ... ... .. ... ... .. ... .. ... ... .. ... ... .. ... .. ... ... .. ... .. ... ... .. ... ... .. ... .. ... ... .. ... ... .. ... .. ... ... .. ... ..

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