What is the ERTC Reinstatement Act proposed in Congress?

The ERTC Reinstatement Act is proposed bipartisan legislation in Congress that would reinstate the employee retention tax credit for 2023. The credit, originally enacted in March 2020 under the CARES Act, provided eligible employers with a refundable tax credit for retaining employees during COVID-19 impacts. It expired at the end of 2021.

The ERTC Reinstatement Act would bring back this tax credit in 2023 to continue assisting employers recovering from the pandemic. It would make the credit available for wages paid after December 31, 2022, and before January 1, 2024.

Some key provisions of the proposed legislation include:

  • A maximum credit of up to $7,500 per employee for 2023
  • Basing eligibility on year-over-year gross receipt declines of at least 15%
  • Allowing certain recovery startup businesses to claim the credit
  • Permitting advance payments of the expected credit

The bill aims to support employers still struggling from pandemic impacts and recovering from the economic downturn. Reinstating this tax incentive is seen as an option to boost employment and retention.

What Are the Key Provisions of the ERTC Reinstatement Act?

The ERTC Reinstatement Act legislation proposing to reinstate the employee retention tax credit for 2023 was introduced in the U.S. House of Representatives on July 28, 2022. It is currently pending in the House Ways and Means Committee.

The bipartisan bill was introduced by Representatives Henry Cuellar (D-TX-28) and Brad Wenstrup (R-OH-2). Original cosponsors included Representatives Mike Kelly (R-PA-16), Lauren Underwood (D-IL-14), Vern Buchanan (R-FL-16), and Donald Payne Jr. (D-NJ-10).

Some key provisions of the ERTC Reinstatement Act include:

  • Making the tax credit available for qualified wages paid after December 31, 2022, and before January 1, 2024.
  • Providing a maximum credit amount of up to $7,500 per employee for 2023.
  • Basing eligibility on employers experiencing gross receipt declines of 15% or more compared to the same quarter in 2019.
  • Allowing new recovery startup businesses established after February 2020 to be eligible.
  • Making the credit fully refundable for employers.

When Was the ERTC Reinstatement Act Introduced in Congress?

The ERTC Reinstatement Act proposed bipartisan legislation to bring back the employee retention tax credit in 2023, was introduced in the House on July 28, 2022, and is currently pending in the House Ways and Means Committee for review.

As of August 2022, the status of the bill is:

  • It has been referred to the House Ways and Means Committee for consideration.
  • The Committee on Ways and Means has taken no further action on the bill beyond referral.
  • No companion bill has been introduced yet in the Senate.
  • The bill would need to pass votes in both the House and Senate before going to the President for signature to become law.
  • No timeline is set yet for potential votes on the bill as it awaits committee action.

Key details of the ERTC Reinstatement Act:

  • It would reinstate the credit for qualified wages paid after December 31, 2022, and before January 1, 2024.
  • Eligible employers could claim a credit of up to $7,500 per employee for 2023.
  • Employers must experience gross receipt declines of 15% or more to qualify.

The path forward and chances of passage for the ERTC Reinstatement Act depend on committee review and Congressional priorities. Employers should watch closely for any progress.

Who Introduced and Sponsored the ERTC Reinstatement Act?

The ERTC Reinstatement Act legislation introduced in the House of Representatives in July 2022 to reinstate the employee retention tax credit for 2023 was proposed by Representatives Henry Cuellar (D-TX-28) and Brad Wenstrup (R-OH-2).

Reps. Cuellar and Wenstrup introduced the bipartisan bill on July 28, 2022, along with several original cosponsors from both parties:

  • Rep. Mike Kelly (R-PA-16)
  • Rep. Lauren Underwood (D-IL-14)
  • Rep. Vern Buchanan (R-FL-16)
  • Rep. Donald Payne Jr. (D-NJ-10)

Key provisions of their proposed ERTC Reinstatement Act include:

  • Reinstating the credit for qualified wages paid from January 1, 2023, through December 31, 2023
  • Providing eligible employers with credits up to $7,500 per employee for 2023
  • Basing eligibility on employers seeing gross receipts decline by 15% or more year-over-year
  • Allowing new recovery startup businesses to qualify for the credit
  • Making the credit fully refundable for employers

Reps. Cuellar and Wenstrup cited the continued economic challenges for businesses emerging from the pandemic as a reason to bring back this tax credit in 2023. As of August 2022, the bill awaits Congressional committee review and further action in the House.

How Would the ERTC Reinstatement Act Extend the Employee Retention Tax Credit?

The ERTC Reinstatement Act proposed in Congress would extend the employee retention tax credit by making it available to eligible employers for qualified wages paid in 2023. Some key details on how the bill would bring back and modify the credit:

  • It would reinstate the credit for the calendar year 2023, covering qualified wages paid from January 1, 2023, through December 31, 2023.
  • The maximum credit amount would be increased to up to $7,500 per employee for 2023, compared to the previous per-employee limits of $5,000 in 2020 and $7,000 in 2021.
  • Eligibility criteria would be shifted from pandemic impacts to a requirement that employers must experience gross receipt declines of 15% or more compared to the same quarter in 2019.
  • Certain recovery startup businesses established after February 15, 2020, would also be newly eligible for the reinstated credit.
  • The credit would remain fully refundable for employers, allowing them to benefit even without tax liability.
  • Employers could potentially claim the credit in advance via quarterly requests before filing tax returns.

In summary, the ERTC Reinstatement Act aims to continue support for employers by bringing back the retention credit for one more calendar year in 2023, with some modifications from the original implementation during COVID-19 disruptions.

What Are the Proposed Eligibility Criteria for the Reinstated Employee Retention Credit?

The ERTC Reinstatement Act proposed in Congress outlines new eligibility criteria employers would need to meet to claim the employee retention tax credit if it is reinstated for 2023.

Rather than tying eligibility to COVID-19 impacts, the new requirements proposed include:

  • Employers must experience a year-over-year decline in gross receipts of 15% or more for a 2023 calendar quarter compared to the same quarter in 2019.
  • Eligible employers include for-profit businesses, tax-exempt organizations, and certain governmental employers.
  • The employer must have employees for whom they paid qualified wages during the quarter.
  • Qualified wages depend on the employer’s average number of full-time employees during 2019.
  • For employers with 500 or fewer employees, all wages count as qualified.
  • For larger employers, qualified wages apply only to employees retained but not currently providing services.
  • New recovery startup businesses established after February 15, 2020, would also qualify.

The credit aims to aid employers still struggling or recovering from the pandemic downturn based on ongoing revenue declines rather than COVID-19 suspensions and disruptions. Meeting the new criteria would make employers eligible to claim the reinstated credit.

What are the Proposed Maximum Credit Amounts per Employee Under the ERTC Reinstatement Act?

The ERTC Reinstatement Act legislation proposed in Congress outlines maximum employee retention tax credit amounts that eligible employers could potentially claim if the credit is reinstated for 2023.

Key details on the proposed credit amounts include:

  • For 2023, the maximum credit amount would be increased to up to $7,500 per employee for the full year.
  • Previously, the credit amounted to up to $5,000 per employee in 2020 and up to $7,000 per employee in 2021.
  • The credit equals a percentage of qualified wages paid to the employee during a quarter.
  • For 2023, the proposed credit rate is 50% of qualified wages.
  • Qualified wages are capped at $10,000 per employee per quarter in 2023.
  • So the maximum credit per employee would be $5,000 per quarter (50% x $10,000 cap).
  • Total credits cannot exceed $7,500 per employee for the full year.
  • The credit is fully refundable for eligible employers.

In summary, the ERTC Reinstatement Act aims to provide meaningful assistance to employers by making up to $7,500 per employee available in retention credits for 2023. Eligible companies could claim up to $5,000 per employee per quarter.

Is the Proposed Reinstated Credit Fully Refundable Under the ERTC Reinstatement Act?

Yes, under the ERTC Reinstatement Act proposed in Congress, the reinstated employee retention tax credit for 2023 would be fully refundable for eligible employers.

This means employers could benefit from the full value of the credit even if it exceeds their federal employment tax liabilities for a quarter.

Key aspects of the credit’s refundability under the legislation:

  • Employers could still claim the credit and receive refunds even if they owe no federal payroll taxes for a quarter.
  • Any excess credit amount beyond the employer’s share of Social Security tax could be refunded.
  • Refundability enhances the credit’s value, especially for struggling employers without tax liability.
  • Employers may be allowed to request advance payment of expected credits before filing using Form 7200.
  • The credit could result in larger refunds on quarterly employment tax returns.
  • Non-profit and tax-exempt employers would also benefit from refunds.

When Could the Reinstated ERC Credit Take Effect if the ERTC Reinstatement Act Passes?

If passed by Congress, the ERTC Reinstatement Act has an intended effective date for the reinstated employee retention tax credit to apply to eligible wages paid starting on January 1, 2023.

Key timing details if the legislation enacting the credit for 2023 is approved:

  • Employers could start claiming credits for qualified wages paid as of January 1, 2023.
  • Eligible wages would need to be paid between January 1, 2023, and December 31, 2023.
  • Employers could likely start filing Form 7200 to request advance credit payments as of Q1 2023.
  • Credits for 2023 wages could be claimed on quarterly employment tax returns Form 941 starting in Q1 2023.
  • Amended returns to claim the credit retroactively would need to be filed by typical time limits applying to the original applicable returns.
  • If passed quickly, IRS guidance for employers may be issued in late 2022.
  • However, the credit’s availability would not apply to wages paid during 2022, only starting in 2023.

In summary, the soonest the reinstated credit proposed by the ERTC Reinstatement Act could go into effect is on January 1, 2023, if it is swiftly passed by Congress and signed into law. Claims would need to relate to eligible wages paid next calendar year.

Here Are Two Additional Resources on the Proposed ERTC Reinstatement Act:

https://wenstrup.house.gov/uploadedfiles/ern22094.pdf

The full legislative text of the ERTC Reinstatement Act was introduced in the House.

https://www.natlawreview.com/article/proposed-bill-would-reinstate-employee-retention-tax-credit-ectc-2023

An article analyzing details and implications of the ERTC Reinstatement Act legislation to bring back the employee retention tax credit.

Step 12: Here are two additional resources on the proposed ERTC Reinstatement Act:

https://wenstrup.house.gov/uploadedfiles/ern22094.pdf

The full legislative text of the ERTC Reinstatement Act was introduced in the House.

https://www.natlawreview.com/article/proposed-bill-would-reinstate-employee-retention-tax-credit-ectc-2023

An article analyzing details and implications of the ERTC Reinstatement Act legislation to bring back the employee retention tax credit.

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