Resources

Client Alerts, News Articles, Blog Posts, & Multimedia

Everything you need to know about BMD and the industry.

IRS Guidance on Employee Retention Credit

Client Alert
December 11, 2020

The Employee Retention Credit created under Section 2302 of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act is a refundable tax credit against certain employment taxes equal to 50 percent of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021. Since the adoption of the CARES Act, employers have expressed concern that if one employer acquires another employer that previously received a PPP loan, the acquirer’s entire aggregated group may no longer be eligible to claim the Employee Retention Credit.

On November 16, 2020, the IRS added two new FAQs to their website addressing this Employee Retention Credit issue. Initially, the only way an employer that received a CARES Act Loan (e.g., PPP) would be eligible for an employee retention credit is if they paid the loan back by May 18, 2020, regardless of whether the loan is subsequently forgiven or paid back after May 18, 2020.

However, an employer acquiring an entity may remain eligible for the Employee Retention Credit after the May 18th deadline if certain conditions are met. Take the following example to understand the conditions. Company A is the Acquiring Employer in the transaction, while Company B is the Target Employer who has received PPP funds. For Employee Retention Credit eligibility conditions to apply, Company A’s acquisition of Company B’s stock or other equity interest must result in Company B becoming a member of the Aggregated Employer Group under the aggregation rules. Now, for the Acquiring Employer to remain eligible for the Employee Retention Credit, prior to the closing date of the transaction, the Target Employer must have:

  • fully satisfied the PPP loan; or
  • submitted a forgiveness application to the PPP lender and established an interest-bearing escrow account.

If one of the conditions are met, the Aggregated Employer Group, after the closing date, will not be treated as having received a PPP loan, provided that the Acquiring Employer – including any member of the Acquiring Employer’s pre-transaction Aggregated Employer Group – had not received a PPP loan before the closing date and no member of the Aggregated Employer Group receives a PPP loan on or after the closing date.  If so, any employer that is a member of the Aggregated Employer Group, including the Target Employer, may claim the Employee Retention Credit for qualified wages paid on and after the closing date, provided that the Aggregated Employer Group otherwise meets the requirements to claim the Employee Retention Credit.  In addition, any Employee Retention Credit claimed by the Acquiring Employer’s pre-transaction Aggregated Employer Group for qualified wages paid before the closing date will not be subject to recapture under section 2301(l)(3) of the CARES Act.

If the Target Employer had received a PPP loan, but prior to the transaction closing date, the PPP Loan is not fully satisfied and no escrow account is established, then, after the closing date, the Aggregated Employer Group (other than the Target Employer) will not be treated as having received a PPP loan, provided that the Acquiring Employer (including any member of the Acquiring Employer’s pre-transaction Aggregated Employer Group) had not received a PPP loan before the closing date and no member of the Aggregated Employer Group receives a PPP loan on or after the closing date. 

Any employer (other than the Target Employer) that is a member of the Aggregated Employer Group may claim the Employee Retention Credit for qualified wages paid on and after the closing date, provided that the Aggregated Employer Group otherwise meets the requirements to claim the Employee Retention Credit.  In addition, any Employee Retention Credit claimed by the Acquiring Employer’s pre-transaction Aggregated Employer Group for qualified wages paid before the closing date will not be subject to recapture under section 2301(l)(3) of the CARES Act. 

However, the Target Employer that received the PPP loan prior to the transaction closing date and that continues to be obligated on the PPP loan after the closing date is ineligible for the Employee Retention Credit for any wages paid to any employee of the Target Employer before or after the closing date.

To find out if you are eligible for the Employee Retention Credit due May 18th, contact the PPP Loan/SBA Loan BMD Practice Group Christopher Meager at cmeager@bmdllc.com.

Christopher Meagerkrista warrenEmployment LawIRSGuidance on CARES Act
Client Alert

Federal and Ohio Laws on Surprise Billing

January 18, 2022Beginning in January 2022, Ohio providers and healthcare facilities will need to comply with both the federal No Surprises Act (“NSA”) and the state surprise billing law (HB 388), which are both designed to protect patients from unexpected medical bills.Client Alert

New Year, New Laws, Old Form Documents? Exhibit A: Changes in Florida’s Real Estate Contracts

January 18, 2022Settling into a New Year often brings renewed energy into setting and pushing new goals of building business relationships, increasing sales, and moving Letters of Intent and negotiations into final, signed agreements. It’s all too easy to grab a form document off the Internet (Google, anyone?), or to pull the last document in your files as a template for your next agreement. However, changes in the law can take effect at the beginning of the calendar year, as well as mid-year or fiscal new year, and sometimes on a random date in between. Your awareness – or lack of awareness – in changes in the law can mean the difference between keeping you and your business operating within the law or putting you at great financial and legal risk for not complying with the law. It can also result in financial and time savings or additional burden in time and costs.Client Alert

Sports Betting Legal in Ohio

January 18, 2022Ohio has made sports betting legal with Governor DeWine signing House Bill 29 into law on December 22, 2021. The Casino Control Commission will regulate sports betting in Ohio and estimates that the launch date for sports betting will be January 1, 2023.Client Alert

Banking and Cannabis: Is it Legal

January 4, 2022Marijuana is still a Schedule 1 drug and is illegal under federal law. However, I am not aware of any federal banking law or regulation, or any other federal law or regulation, which explicitly makes it illegal for banks and other financial institutions to provide their traditional services to state legal cannabis businesses.Client Alert

Protections Under Federal and Ohio Law for Bona Fide Prospective Purchasers of Contaminated Property

November 17, 2021Most industrial/commercial property developers are generally aware of the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), often also referred to as “Superfund”. CERCLA, a United Stated federal law administered by the U.S. Environmental Protection Agency, was created, in part, because the U.S. Environmental Protection Agency recognized that environmental cleanup could help promote reuse or redevelopment of contaminated, potentially contaminated, and formerly contaminated properties, helping revitalize communities that may have been adversely affected by the presence of the contaminated properties. Commercial property developers should be aware that CERCLA provides for some important liability limitations for landowners that own contaminated property impacted by materials hazardous to the environment. It can also assist with landowners concerned about the potential liabilities stemming from the presence of contamination to which they have not contributed. In particular, CERCLA provides important liability limitations for landowners that qualify as (1) bona fide prospective purchasers (BFPPS), (2) contiguous property owners, or (3) innocent landowners.
Older posts
Newer posts