Employee Retention Tax Credit Reinstatement Bill Introduced in the U.S. Senate

Date: February 17, 2022

The bill would restore the Employee Retention Tax Credit (ERTC) timeframe to include the fourth quarter of 2021

On Feb. 10, the Senate joined the House of Representatives by introducing the Employee Retention Tax Credit Reinstatement Act. Its sponsors are Sen. Tim Scott (R-SC), Sen. Maggie Hassan (D-NH), Sen. Shelley Moore Capito (R-WV), Sen. Ben Cardin (D-MD), and Sen. Mark Warner (D-VA).

In the CARES Act of 2020, Congress created the Employee Retention Tax Credit (ERTC), to aid small businesses during the COVID-19 pandemic. The ERTC aimed to incentivize employee retention by offering employers a quarterly credit for each qualified employee.

According to NFIB’s January COVID-19 impact survey, 13% of small employers claimed the ERTC for wages in 2020 and another 12% claimed the ERTC for wages in 2021.

The ERTC was originally set to expire on January 1, 2022, giving employers the ability to claim it for all four quarters of 2021. Since the ERTC offered savings of $7,000 per employee per quarter in 2021, this meant employers were eligible to up to $28,000 per employee in tax credits last year.  

However, on November 15, 2021, the federal Infrastructure Investment and Jobs Act (IIJA) was signed into law. This bipartisan physical infrastructure law includes a provision changing the ERTC’s timeframe to only apply for the first three quarters of 2021, and not Q4. In December, H.R. 6161 was introduced in the U.S. House, providing momentum for the U.S. Senate companion bill introduced last week S. 3074.

In response to the U.S. Senate’s introduction of the Employee Retention Tax Credit Reinstatement Act, NFIB Senior Manager of Federal Government Relations Courtney Titus Brooks urged Congress to pass the legislation. “The Employee Retention Tax Credit (ERTC) was a great resource for small businesses throughout the COVID-19 pandemic and provided many businesses the financial support they needed to keep their employees on the payroll,” she said. “By passing this legislation and reinstating the ERTC for the fourth quarter of 2021, owners who were planning on using the tax credit will no longer face a retroactive tax increase, something small businesses simply cannot afford right now. NFIB encourages Congress to pass the Employee Retention Tax Credit Reinstatement Act as small businesses continue to work on their economic recovery.”

If the early termination of the ERTC is harmful to your business, make sure your Members of Congress know that you also support the passage of the ERTC Reinstatement Act to return the ERTC to its originally planned timeframe instead of being subjected to an eleventh-hour shortening. 

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