Guidance that bars businesses from claiming the employee retention credit if they are only paying for furloughed employees’ health benefits wasn’t the intent of lawmakers, according to congressional taxwriters.
Senate Finance Committee Chair Chuck Grassley, R-Iowa; Finance Committee ranking member Ron Wyden, D-Ore.; and House Ways and Means Committee Chair Richard E. Neal, D-Mass., are asking Treasury to reverse the decision in a May 4 letter to Treasury Secretary Steven Mnuchin.
The lawmakers said that when the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P. L. 116-136) was written, the term “qualified wages” — as used regarding the retention credit — was “explicitly expanded” to include certain health benefits in addition to regular wages.
“The intent [was] to provide an incentive for employers to continue providing health benefits to their employees, even if the employer was otherwise unable to continue paying regular wages,” the letter said.
However, an April 29 FAQ from the IRS states that if an employer doesn’t pay its employees any wages for the time they aren’t working, it “may not treat any portion of its health plan expenses as qualified wages for purposes . . . because no portion of the health plan expenses would be allocable to wages paid to its employees.”
According to the letter, lawmakers expressed their intent regarding the credit to Treasury and the IRS before the guidance’s release.
“We urge you to reconsider this determination in light of congressional intent and the importance of providing access to affordable health care during the ongoing health crisis,” the lawmakers wrote.