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

Vacating, Modifying or Correcting an Arbitration Award Under R.C. 2711.13: Three-Month Limitation Maximum; Not Guaranteed Amount of Time

June 8, 2021In a recent decision, the Supreme Court of Ohio held that neither R.C. 2711.09 nor R.C. 2711.13 requires a court to wait three months after an arbitration award is issued before confirming the award. R.C. 2711.13 provides that “after an award in an arbitration proceeding is made, any party to the arbitration may file a motion in the court of common pleas for an order vacating, modifying, or correcting the award.” Any such motion to vacate, modify, or correct an award “must be served upon the adverse party or his attorney within three months after the award is delivered to the parties in interest.” In BST Ohio Corporation et al. v. Wolgang, the Court held the three-month period set forth in R.C. 2711.13 is not a guaranteed time period in which to file a motion to vacate, modify, or correct an arbitration award. 2021-Ohio-1785.Client Alert

EEOC Provides Updated Guidance Regarding Employer COVID-19 Vaccine Policies

June 3, 2021On May 28, 2021, the U.S. Equal Employment Opportunity Commission updated its guidance regarding employer COVID-19 vaccination policies. The new guidance provides much-needed clarification of expectations for employers seeking to promote workplace safety and prevent the spread of COVID-19, including discussion of mandatory vaccination policies, voluntary vaccination incentives, and accommodation of employees based on disability or sincerely held religious beliefs. The full text of the update is found in Section K of the EEOC’s COVID Q&A document. You can also learn more about these and other developments from BMD's Bryan Meek and Monica Andress through the Employment Law After Hours YouTube channel, available here.Client Alert

What Telemedical Barriers Practices Face and How They Can Manage Them

May 28, 2021The onset of the COVID-19 pandemic has led to many businesses and industries having to rapidly adapt new practices in order to stay profitable, and the healthcare industry is no exception. Although telehealth tools and practices have existed and been used since the Vietnam War, the pandemic has caused many individual healthcare practices to heavily rely on telehealth as a large portion of their service mix in order to continue to provide care for patients. Because of this rapid adoption of telehealth practices in order to combat the restrictions of COVID-19, the telemedicine industry’s revenue has exploded in the last year. Experts predict that telehealth will continue to grow in use beyond the current pandemic, estimating the industry’s worth to be $25 billion by 2025. However, this rapid adoption of telehealth was prompted out of need and has not been without its own barriers that practices now face.Client Alert

Which Entity Should I Form When Starting a New Business?

May 21, 2021As a tax law attorney, friends and acquaintances ask me this question all the time: what type of entity should I form when starting a new business? With many business options available it can be confusing determining which business structure would be appropriate. Below is a general overview of each business structure and the tax responsibilities of each.Client Alert

IMPORTANT UPDATE: IRS Opens Portals for Advanced Child Tax Credit Payments 2021

May 20, 2021The American Rescue Plan Act (the “Act”) expands the Child Tax Credit for tax year 2021. In addition to expanding the Child Tax Credit, the Act provides for advance payments of the 2021 Child Tax Credit. Beginning in July, the IRS will automatically send Advanced Child Tax Credit payments to eligible taxpayers based on their 2020 tax return (or 2019 tax return if the 2020 tax return has not been filed and processed yet). The amount of the advanced payment will be up to $300 each month for each qualifying child under 6 years old at the end of 2021 and $250 each month for each qualifying child between 6 and 17 years old at the end of 2021. For example, if you have 2 qualifying children, one 4 years old and one 8 years old, you may receive up to $550 each month in advance child tax credit payments.
Older posts
Newer posts