The Senate and the House of Representatives have passed the Infrastructure Investment and Jobs Act (“the Act”). It is expected that President Biden will sign the Act into law next week, when Congress is back in session. The Act includes changes to the Employee Retention Credit (“ERC”) for 2021. Specifically, the Act ends the ERC retroactively, and makes wages paid after 9/30/2021 ineligible for many employers.

Before the Act, eligible employers must:

  1. be subject to a governmental order suspending its trade or business;
  2. experience a substantial decline in gross receipts; or
  3. be a recovery startup business.

The Act continues to allow ERC for a recovery start up business; however, other previously eligible employers are ineligible for the fourth quarter of 2021.

A recovery startup business is any employer that:

  1. began carrying on a trade or business after 2/15/2020; and
  2. has average annual gross receipts that do not exceed $1,000,000 for the next three-year period.

Before the Act, there was a prerequisite that a recovery startup business must not have experienced a significant decline in gross receipts or have been subject to a full or partial suspension under a government order. That criteria no longer applies

If you retained payroll taxes in anticipation of receiving the ERC based on post-September 30, 2021 payroll taxes, you may need to review your situation and determine how and when to repay those taxes and address any other compliance issues. We anticipate IRS will issue guidance to assist employers in handling any compliance issues.

Please contact your local Kemper office if you have questions or need additional information on house these changes impact you.