The employee retention credit (ERC) is a hot topic for nonprofit life plan communities, Ziegler Managing Director Tommy Brewer said Thursday at a webinar hosted by the specialty investment bank.
“The credits allow a significant amount of funds. It can be in the millions of dollars,” and be very impactful for an organization, he said.
The ERC is a fully refundable payroll credit for qualified wages that qualified employers pay their employees. This can include allocable qualified health plan expenses, Chad Kunze, senior living principal at CliftonLarsonAllen said. For 2020, the credit amount is 50% of qualified wages up to $10,000 for the year. For 2021, the amount was increased to 70% off qualified wages up to $10,000 per quarter for each eligible employee. Companies have three years to apply for the credit.
“In 2021, the Consolidated Appropriations Act extended the opportunity to extend the credit. .. It also changes the criteria for eligibility,” said Jennifer Rohen, principal and business incentives consulting practice leader at CliftonLarsonAllen.
“We’ve had quite a winding legislative journey for this”, she added. “It did change quite a bit from 2020 to 2021 with the legislation.”
The criteria for determining a large vs. small employer is based on full-time employee count. The 2020 credits were limited to those with 100 or fewer full-time employees working in calendar year 2019. In 2021, the limit expanded to 500 or fewer employees.
Eligibility for ERC is based on gross receipts reduction. The gross receipts test in 2020 was for a company to have greater than 50% reduction in any quarter compared to the same quarter in 2019. In 2021, companies were eligible if they experienced a greater than 20% reduction in any quarter compared to the same quarter in 2019. In both instances, the credit is available for wages paid after March 12, 2020.