Bill to Enhance Employee Tax Credit

June 10, 2020

Reps. Stephanie Murphy (D-Fla.), John Katko (R-N.Y.), Suzan DelBene (D-Wash.), Brian Fitzpatrick (R-Pa.), and Chris Pappas (D-N.H.), introduced bipartisan legislation to enhance the employee retention tax credit (ERTC) that Congress and the President recently enacted as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

The ERTC encourages businesses of all sizes to retain their employees so workers may continue to receive income and employer-sponsored health insurance without having to seek unemployment benefits. The ERTC also ensures workers and businesses are better-positioned to resume normal operations once the economic crisis caused by COVID-19 comes to an end.

The ERTC included in the CARES Act is a refundable tax credit equal to 50 percent of up to $10,000 in qualified wages that an eligible employer, including a non-profit organization, pays to an employee between March 12, 2020 and January 1, 2021—that is, a maximum of $5,000 per employee. An employer is eligible for the credit if they had to fully or partially suspend operations due to COVID-19, or if the employer experienced a “significant decline in gross receipts,” due to COVID-19, defined as having gross receipts that are 50 percent less than gross receipts in the same quarter in the prior calendar year. If the employer had 100 or fewer full-time employees, all wages paid by the employer are credit-eligible.

The Jumpstarting Our Businesses’ Success Credit (JOBS Credit) Act of 2020, would make a number of targeted improvements to the ERTC to better fulfill its goal of keeping workers connected to their jobs during this crisis. The changes include:

  • Increasing the credit percentage from 50 percent to 80 percent of qualified wages;
  • Increasing the per-employee limitation from $10,000 for all calendar quarters to $15,000 per calendar quarter (and an aggregate of $45,000 for all calendar quarters);
  • Changing the threshold for treatment as a large employer from employers having more than 100 employees to employers having more than 1,500 employees (based on the average number of full-time employees in 2019) or having gross receipts above $41.5 million in 2019;
  • Making it easier for employers to qualify for the credit by phasing in the credit, so that employers who have experienced more than a 20 percent decline in gross receipts can claim a portion of the credit;
  • Clarifying that “qualified wages” include qualified health benefits and that employers who continue providing such benefits to their employees qualify for the ERTC even if they do not continue paying other qualifying wages;
  • Allowing state, territory, and tribal governmental employers (and any political subdivision, agency, or instrumentality of these entities) to claim the credit if these employers retain employees notwithstanding the closure of their operations; and
  • Improving coordination between the ERTC and the Paycheck Protection Program so employers can be eligible for both programs, but with guardrails in place to prevent “double dipping.”

NSBA supports the expansion of the ERTC and you can find the press release here. The full text of the bill can be found here. A one-page fact sheet on the bill can be found here.