On Friday March 27, 2020, the President signed into law, the Coronavirus Aid, Relief, and Economic Security Act (H.R. 748) or “CARES Act,” providing for, among other things, a refundable payroll tax credit for 50% of wages paid (up to $10,000 in wages per employee) by eligible employers to certain employees (the “Employee Retention Credit”).
On March 31, 2020, in notice IR-2020-62, the Internal Revenue Service (IRS) and the U.S. Department of the Treasury issued initial guidance on the Employee Retention Credit. So long as they qualify, the credit is available to all employers regardless of size, including tax-exempt organizations, other than: (i) State and local governments and their instrumentalities, and (ii) any small business obtaining a loan pursuant to the Paycheck Protection Program (the “PPP”). In other words, an employer participating in the PPP may not also avail themselves of the Employee Retention Credit described in this Client Alert. The PPP was the subject of a prior Client Alert of ours which can be found by clicking this link.
This IRS guidance pertaining to the Employee Retention Credit is available at: https://www.irs.gov/newsroom/irs-employee-retention-credit-available-for-many-businesses-financially-impacted-by-covid-19
Additionally, on March 31, 2020, the IRS published frequently asked questions (FAQs) on the Employee Retention Credit. The FAQs include several examples showing the application of the credit rules. The IRS FAQs on the Employee Retention Credit under the CARES Act are available at: https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act
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