26 USC 3134 - Employee retention credit for employers subject to closure due to COVID

Collapse to view only § 3134. Employee retention credit for employers subject to closure due to COVID–19

§ 3131. Credit for paid sick leave
§ 3132. Payroll credit for paid family leave
§ 3133. Special rule related to tax on employers
§ 3134. Employee retention credit for employers subject to closure due to COVID–19

§ 3131. Credit for paid sick leave

(a) In general

(b) Limitations and refundability

(1) Wages taken into account

(2) Overall limitation on number of days taken into account

The aggregate number of days taken into account under paragraph (1) for any calendar quarter shall not exceed the excess (if any) of—

(A) 10, over

(B) the aggregate number of days so taken into account during preceding calendar quarters in such calendar year (other than the first quarter of calendar year 2021).

(3) Credit limited to certain employment taxes

(4) Refundability of excess credit

(A) Credit is refundable

(B) Advancing credit

For purposes of this section—

(1) In general

(2) Rules of application

For purposes of determining whether wages are qualified sick leave wages under paragraph (1)—

(A) In general

The Emergency Paid Sick Leave Act shall be applied—

(i) by inserting “, the employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID–19 and such employee has been exposed to COVID–19 or the employee’s employer has requested such test or diagnosis, or the employee is obtaining immunization related to COVID–19 or recovering from any injury, disability, illness, or condition related to such immunization” after “medical diagnosis” in section 5102(a)(3) thereof, and

(ii) by applying section 5102(b)(1) of such Act separately with respect to each calendar year after 2020 (and, in the case of calendar year 2021, without regard to the first quarter thereof).

(B) Leave must meet requirements

(d) Allowance of credit for certain health plan expenses

(1) In general

(2) Qualified health plan expenses

(3) Allocation rules

(e) Allowance of credit for amounts paid under certain collectively bargained agreements

(1) In general

The amount of the credit allowed under subsection (a) shall be increased by the sum of—

(A) so much of the employer’s collectively bargained defined benefit pension plan contributions as are properly allocable to the qualified sick leave wages for which such credit is so allowed, plus

(B) so much of the employer’s collectively bargained apprenticeship program contributions as are properly allocable to the qualified sick leave wages for which such credit is so allowed.

(2) Collectively bargained defined benefit pension plan contributions

For purposes of this subsection—

(A) In general

The term “collectively bargained defined benefit pension plan contributions” means, with respect to any calendar quarter, contributions which—

(i) are paid or incurred by an employer during the calendar quarter on behalf of its employees to a defined benefit plan (as defined in section 414(j)), which meets the requirements of section 401(a),

(ii) are made based on a pension contribution rate, and

(iii) are required to be made pursuant to the terms of a collective bargaining agreement in effect with respect to such calendar quarter.

(B) Pension contribution rate

The amount of collectively bargained defined benefit pension plan contributions allocated to qualified sick leave wages for any calendar quarter shall be the product of—

(i) the pension contribution rate (expressed as an hourly rate), and

(ii) the number of hours for which qualified sick leave wages were provided to employees covered under the collective bargaining agreement described in subparagraph (A)(iii) during the calendar quarter.

(3) Collectively bargained apprenticeship program contributions

For purposes of this section—

(A) In general

The term “collectively bargained apprenticeship program contributions” means, with respect to any calendar quarter, contributions which—

(i) are paid or incurred by an employer on behalf of its employees with respect to the calendar quarter to a registered apprenticeship program,

(ii) are made based on an apprenticeship program contribution rate, and

(iii) are required to be made pursuant to the terms of a collective bargaining agreement that is in effect with respect to such calendar quarter.

(B) Registered apprenticeship program

(D) Allocation rules

The amount of collectively bargained apprenticeship program contributions allocated to qualified sick leave wages for any calendar quarter shall be the product of—

(i) the apprenticeship program contribution rate (expressed as an hourly rate), and

(f) Definitions and special rules

(1) Applicable employment taxes

For purposes of this section, the term “applicable employment taxes” means the following:

(A) The taxes imposed under section 3111(b).

(B) So much of the taxes imposed under section 3221(a) as are attributable to the rate in effect under section 3111(b).

(2) Wages

(3) Denial of double benefit

(4) Election to not take certain wages into account

(5) Certain governmental employers

(6) Extension of limitation on assessment

Notwithstanding section 6501, the limitation on the time period for the assessment of any amount attributable to a credit claimed under this section shall not expire before the date that is 5 years after the later of—

(A) the date on which the original return which includes the calendar quarter with respect to which such credit is determined is filed, or

(B) the date on which such return is treated as filed under section 6501(b)(2).

(7) Coordination with certain programs

(A) In general

This section shall not apply to so much of the qualified sick leave wages paid by an eligible employer as are taken into account as payroll costs in connection with—

(i) a covered loan under section 7(a)(37) or 7A of the Small Business Act,

(ii) a grant under section 324 of the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act, or

(iii) a restaurant revitalization grant under section 5003 of the American Rescue Plan Act of 2021.

(B) Application where PPP loans not forgiven

The Secretary shall issue guidance providing that payroll costs paid during the covered period shall not fail to be treated as qualified sick leave wages under this section by reason of subparagraph (A)(i) to the extent that—

(i) a covered loan of the taxpayer under section 7(a)(37) of the Small Business Act is not forgiven by reason of a decision under section 7(a)(37)(J) of such Act, or

(ii) a covered loan of the taxpayer under section 7A of the Small Business Act is not forgiven by reason of a decision under section 7A(g) of such Act.

Terms used in the preceding sentence which are also used in section 7A(g) or 7(a)(37)(J) of the Small Business Act shall, when applied in connection with either such section, have the same meaning as when used in such section, respectively.

(g) Regulations

The Secretary shall prescribe such regulations or other guidance as may be necessary to carry out the purposes of this section, including—

(1) regulations or other guidance to prevent the avoidance of the purposes of the limitations under this section,

(2) regulations or other guidance to minimize compliance and record-keeping burdens under this section,

(3) regulations or other guidance providing for waiver of penalties for failure to deposit amounts in anticipation of the allowance of the credit allowed under this section,

(4) regulations or other guidance for recapturing the benefit of credits determined under this section in cases where there is a subsequent adjustment to the credit determined under subsection (a),

(5) regulations or other guidance to ensure that the wages taken into account under this section conform with the paid sick time required to be provided under the Emergency Paid Sick Leave Act,

(6) regulations or other guidance to permit the advancement of the credit determined under subsection (a), and

(7) regulations or other guidance with respect to the allocation, reporting, and substantiation of collectively bargained defined benefit pension plan contributions and collectively bargained apprenticeship program contributions.

(h) Application of section

(i) Treatment of deposits

(j) Non-discrimination requirement

(Added Pub. L. 117–2, title IX, § 9641(a), Mar. 11, 2021, 135 Stat. 161.)

§ 3132. Payroll credit for paid family leave

(a) In general

(b) Limitations and refundability

(1) Wages taken into accountThe amount of qualified family leave wages taken into account under subsection (a), plus any increases under subsection (e), with respect to any individual shall not exceed—

(A) for any day (or portion thereof) for which the individual is paid qualified family leave wages, $200, and

(B) in the aggregate with respect to all calendar quarters, $12,000.

(2) Credit limited to certain employment taxes

(3) Refundability of excess credit

(A) Credit is refundable

(B) Advancing credit

(1) In general

(2) Rules of application

(A) In generalFor purposes of determining whether wages are qualified family leave wages under paragraph (1)—

(i) section 110(a)(2)(A) of the Family and Medical Leave Act of 1993 shall be applied by inserting “or any reason for leave described in section 5102(a) of the Families First Coronavirus Response Act, or the employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID–19 and such employee has been exposed to COVID–19 or the employee’s employer has requested such test or diagnosis, or the employee is obtaining immunization related to COVID–19 or recovering from any injury, disability, illness, or condition related to such immunization” after “public health emergency”, and

(ii) section 110(b) of such Act shall be applied—(I) without regard to paragraph (1) thereof,(II) by striking “after taking leave after such section for 10 days” in paragraph (2)(A) thereof, and(III) by substituting “$12,000” for “$10,000” in paragraph (2)(B)(ii) thereof.

(B) Leave must meet requirements

(d) Allowance of credit for certain health plan expenses

(1) In general

(2) Qualified health plan expenses

(3) Allocation rules

(e) Allowance of credit for amounts paid under certain collectively bargained agreements

(1) In generalThe amount of the credit allowed under subsection (a) shall be increased by so much of the sum of—

(A) so much of the employer’s collectively bargained defined benefit pension plan contributions as are properly allocable to the qualified family leave wages for which such credit is so allowed, plus

(B) so much of the employer’s collectively bargained apprenticeship program contributions as are properly allocable to the qualified family leave wages for which such credit is so allowed.

(2) Collectively bargained defined benefit pension plan contributionsFor purposes of this subsection—

(A) In general

(B) Allocation rulesThe amount of collectively bargained defined benefit pension plan contributions allocated to qualified family leave wages for any calendar quarter shall be the product of—

(i) the pension contribution rate (as defined in section 3131(e)(2)), expressed as an hourly rate, and

(ii) the number of hours for which qualified family leave wages were provided to employees covered under the collective bargaining agreement described in section 3131(e)(2)(A)(iii) during the calendar quarter.

(3) Collectively bargained apprenticeship program contributionsFor purposes of this section—

(A) In general

(B) Allocation rulesFor purposes of this section, the amount of collectively bargained apprenticeship program contributions allocated to qualified family leave wages for any calendar quarter shall be the product of—

(i) the apprenticeship contribution rate (as defined in section 3131(e)(3)), expressed as an hourly rate, and

(ii) the number of hours for which qualified family leave wages were provided to employees covered under the collective bargaining agreement described in section 3131(e)(3)(A)(iii) during the calendar quarter.

(f) Definitions and special rules

(1) Applicable employment taxesFor purposes of this section, the term “applicable employment taxes” means the following:

(A) The taxes imposed under section 3111(b).

(B) So much of the taxes imposed under section 3221(a) as are attributable to the rate in effect under section 3111(b).

(2) Wages

(3) Denial of double benefit

(4) Election to not take certain wages into account

(5) Certain governmental employers

(6) Extension of limitation on assessmentNotwithstanding section 6501, the limitation on the time period for the assessment of any amount attributable to a credit claimed under this section shall not expire before the date that is 5 years after the later of—

(A) the date on which the original return which includes the calendar quarter with respect to which such credit is determined is filed, or

(B) the date on which such return is treated as filed under section 6501(b)(2).

(7) Coordination with certain programs

(A) In generalThis section shall not apply to so much of the qualified family leave wages paid by an eligible employer as are taken into account as payroll costs in connection with—

(i) a covered loan under section 7(a)(37) or 7A of the Small Business Act,

(ii) a grant under section 324 of the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act, or

(iii) a restaurant revitalization grant under section 5003 of the American Rescue Plan Act of 2021.

(B) Application where PPP loans not forgivenThe Secretary shall issue guidance providing that payroll costs paid during the covered period shall not fail to be treated as qualified family leave wages under this section by reason of subparagraph (A)(i) to the extent that—

(i) a covered loan of the taxpayer under section 7(a)(37) of the Small Business Act is not forgiven by reason of a decision under section 7(a)(37)(J) of such Act, or

(ii) a covered loan of the taxpayer under section 7A of the Small Business Act is not forgiven by reason of a decision under section 7A(g) of such Act.

(g) RegulationsThe Secretary shall prescribe such regulations or other guidance as may be necessary to carry out the purposes of this section, including—

(1) regulations or other guidance to prevent the avoidance of the purposes of the limitations under this section,

(2) regulations or other guidance to minimize compliance and record-keeping burdens under this section,

(3) regulations or other guidance providing for waiver of penalties for failure to deposit amounts in anticipation of the allowance of the credit allowed under this section,

(4) regulations or other guidance for recapturing the benefit of credits determined under this section in cases where there is a subsequent adjustment to the credit determined under subsection (a),

(5) regulations or other guidance to ensure that the wages taken into account under this section conform with the paid leave required to be provided under the Emergency Family and Medical Leave Expansion Act (including the amendments made by such Act),

(6) regulations or other guidance to permit the advancement of the credit determined under subsection (a), and

(h) Application of section

(i) Treatment of deposits

(j) Non-discrimination requirement

(Added Pub. L. 117–2, title IX, § 9641(a), Mar. 11, 2021, 135 Stat. 166.)

§ 3133. Special rule related to tax on employers

(a) In general

(b) Denial of double benefit

(Added Pub. L. 117–2, title IX, § 9641(a), Mar. 11, 2021, 135 Stat. 171.)

§ 3134. Employee retention credit for employers subject to closure due to COVID–19

(a) In general

(b) Limitations and refundability

(1) In general

(A) Wages taken into account

(B) Recovery startup businesses

(2) Credit limited to employment taxes

(3) Refundability of excess credit

(1) Applicable employment taxesThe term “applicable employment taxes” means the following:

(A) The taxes imposed under section 3111(b).

(B) So much of the taxes imposed under section 3221(a) as are attributable to the rate in effect under section 3111(b).

(2) Eligible employer

(A) In generalThe term “eligible employer” means any employer—

(i) which was carrying on a trade or business during the calendar quarter for which the credit is determined under subsection (a), and

(ii) with respect to any calendar quarter, for which—(I) the operation of the trade or business described in clause (i) is fully or partially suspended during the calendar quarter due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to the coronavirus disease 2019 (COVID–19),(II) the gross receipts (within the meaning of section 448(c)) of such employer for such calendar quarter are less than 80 percent of the gross receipts of such employer for the same calendar quarter in calendar year 2019, or(III) the employer is a recovery startup business (as defined in paragraph (5)).

With respect to any employer for any calendar quarter, if such employer was not in existence as of the beginning of the same calendar quarter in calendar year 2019, clause (ii)(II) shall be applied by substituting “2020” for “2019”.

(B) Election to use alternative quarterAt the election of the employer—

(i) subparagraph (A)(ii)(II) shall be applied—(I) by substituting “for the immediately preceding calendar quarter” for “for such calendar quarter”, and(II) by substituting “the corresponding calendar quarter in calendar year 2019” for “the same calendar quarter in calendar year 2019”, and

(ii) the last sentence of subparagraph (A) shall be applied by substituting “the corresponding calendar quarter in calendar year 2019” for “the same calendar quarter in calendar year 2019”.

An election under this subparagraph shall be made at such time and in such manner as the Secretary shall prescribe.

(C) Tax-exempt organizationsIn the case of an organization which is described in section 501(c) and exempt from tax under section 501(a)—

(i) clauses (i) and (ii)(I) of subparagraph (A) shall apply to all operations of such organization, and

(ii) any reference in this section to gross receipts shall be treated as a reference to gross receipts within the meaning of section 6033.

(3) Qualified wages

(A) In generalThe term “qualified wages” means—

(i) in the case of an eligible employer for which the average number of full-time employees (within the meaning of section 4980H) employed by such eligible employer during 2019 was greater than 500, wages paid by such eligible employer with respect to which an employee is not providing services due to circumstances described in subclause (I) or (II) of paragraph (2)(A)(ii), or

(ii) in the case of an eligible employer for which the average number of full-time employees (within the meaning of section 4980H) employed by such eligible employer during 2019 was not greater than 500—(I) with respect to an eligible employer described in subclause (I) of paragraph (2)(A)(ii), wages paid by such eligible employer with respect to an employee during any period described in such clause, or(II) with respect to an eligible employer described in subclause (II) of such paragraph, wages paid by such eligible employer with respect to an employee during such quarter.

(B) Special rule for employers not in existence in 2019

(i) In general

(ii)

(D) Exception

(4) Wages

(A) In general

(B) Allowance for certain health plan expenses

(i) In general

(ii) Allocation rules

(5) Recovery startup businessThe term “recovery startup business” means any employer—

(A) which began carrying on any trade or business after February 15, 2020, and

(B) for which the average annual gross receipts of such employer (as determined under rules similar to the rules under section 448(c)(3)) for the 3-taxable-year period ending with the taxable year which precedes the calendar quarter for which the credit is determined under subsection (a) does not exceed $1,000,000.

(6) Other terms

(d) Aggregation rule

(e) Certain rules to apply

(f) Certain governmental employers

(1) In general

(2) ExceptionParagraph (1) shall not apply to—

(A) any organization described in section 501(c)(1) and exempt from tax under section 501(a), or

(B) any entity described in paragraph (1) if—

(i) such entity is a college or university, or

(ii) the principal purpose or function of such entity is providing medical or hospital care.

In the case of any entity described in subparagraph (B), such entity shall be treated as satisfying the requirements of subsection (c)(2)(A)(i).

(g) Election to not take certain wages into account

(h) Coordination with certain programs

(1) In generalThis section shall not apply to so much of the qualified wages paid by an eligible employer as are taken into account as payroll costs in connection with—

(A) a covered loan under section 7(a)(37) or 7A of the Small Business Act,

(B) a grant under section 324 of the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act, or

(2) Application where PPP loans not forgivenThe Secretary shall issue guidance providing that payroll costs paid during the covered period shall not fail to be treated as qualified wages under this section by reason of paragraph (1) to the extent that—

(A) a covered loan of the taxpayer under section 7(a)(37) of the Small Business Act is not forgiven by reason of a decision under section 7(a)(37)(J) of such Act, or

(B) a covered loan of the taxpayer under section 7A of the Small Business Act is not forgiven by reason of a decision under section 7A(g) of such Act.

(i) Third party payors

(j) Advance payments

(1) In general

(2) Advance payments to small employers

(A) In general

(B) Special rule for seasonal employers

(3) Reconciliation of credit with advance payments

(A) In general

(B) Excess advance payments

(k) Treatment of deposits

(l) Extension of limitation on assessmentNotwithstanding section 6501, the limitation on the time period for the assessment of any amount attributable to a credit claimed under this section shall not expire before the date that is 5 years after the later of—

(1) the date on which the original return which includes the calendar quarter with respect to which such credit is determined is filed, or

(2) the date on which such return is treated as filed under section 6501(b)(2).

(m) Regulations and guidanceThe Secretary shall issue such forms, instructions, regulations, and other guidance as are necessary—

(1) to allow the advance payment of the credit under subsection (a) as provided in subsection (j)(2), subject to the limitations provided in this section, based on such information as the Secretary shall require,

(2) with respect to the application of the credit under subsection (a) to third party payors (including professional employer organizations, certified professional employer organizations, or agents under section 3504), including regulations or guidance allowing such payors to submit documentation necessary to substantiate the eligible employer status of employers that use such payors, and

(3) to prevent the avoidance of the purposes of the limitations under this section, including through the leaseback of employees.

Any forms, instructions, regulations, or other guidance described in paragraph (2) shall require the customer to be responsible for the accounting of the credit and for any liability for improperly claimed credits and shall require the certified professional employer organization or other third party payor to accurately report such tax credits based on the information provided by the customer.

(n) Application

(Added Pub. L. 117–2, title IX, § 9651(a), Mar. 11, 2021, 135 Stat. 177; amended Pub. L. 117–58, div. H, title VI, § 80604(a), Nov. 15, 2021, 135 Stat. 1341.)