Employee Retention Credit (ERC) Repealed Retroactively by New Legislation

November 10, 2021

Employee Retention Credit (ERC) Retroactively Repealed by New Legislation

On November 5, 2021, the House of Representatives passed HR 3684, the “Infrastructure Investment and Jobs Act,” which was signed shortly thereafter by the President.

While the Act does not contain many tax provisions, section 80604 of the Act retroactively repeals the Employee Retention Credit (ERC) for wages paid on or after October 1, 2021 for most employers. The only employers who may claim ERCs for the 4th quarter of this year are “recovery startup businesses,” which are businesses that opened their doors after February 15, 2020 and have annualized gross receipts of less than $1 million.

Businesses that expected to be able to claim ERCs for the 4th quarter and either reduced or eliminated their payroll tax deposits in the past several weeks should make arrangements to make make-up deposits ASAP in order to minimize penalties.

If you are affected by the retroactive repeal and have any questions or need help making sure you make the correct deposits in time, please contact your Marks Paneth advisor or James (Jay) M. Brower, Jr., Partner, State and Local Tax Leader.