Menu
Tax Notes logo

ERC Termination Would Harm Small Businesses, AICPA Says

OCT. 26, 2021

ERC Termination Would Harm Small Businesses, AICPA Says

DATED OCT. 26, 2021
DOCUMENT ATTRIBUTES

AICPA Advocates on Behalf of Businesses that Benefit from the Employee Retention Credit

Washington, D.C. (October 28, 2021) — The American Institute of CPAs (AICPA) has sent a letter to Congressional leadership on the Senate Finance Committee and the House Ways & Means Committee concerning a provision of the Infrastructure Investment and Jobs Act which, if enacted, would terminate the employee retention credit by sunsetting its benefits three months early, effective October 1, 2021.

With October 1st behind us, pending legislation such as this can be very confusing to taxpayers and their advisors. When Congress passed the employee retention credit (ERC) as part of a larger COVID relief package nearly two years ago, they did so in an effort to help businesses pull through the pandemic and boost our nation's economic recovery. This benefit was intended to sunset at the end of 2021.

If pending legislation moves to enactment, creating a retroactive sunset, the AICPA recommends that there be a committee report directive to the IRS and Treasury to waive any penalties and provide a reasonable, practical method for payment of unpaid employment taxes.

“Many do not understand that the credit continues to be available, and others are reluctant to take advantage of the credit by reducing current payroll tax deposits, fearing that it may be retroactively repealed and penalties for failure to deposit taxes may apply,” the AICPA says in the letter.

“It is vital that business owners and their advisors understand what the passage of this legislation will mean for them and their businesses,” said AICPA Vice President of Taxation Edward Karl, CPA, CGMA. “Fairness and administrability would dictate that taxpayers not be penalized for taking advantage of a tax provision that was clearly available to them in the law.”

About the American Institute of CPAs

The American Institute of CPAs® (AICPA®) is the world's largest member association representing the CPA profession, with more than 428,000 members in the United States and worldwide, and a history of serving the public interest since 1887. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting. The AICPA sets ethical standards for its members and U.S. auditing standards for private companies, not-for-profit organizations, and federal, state and local governments. It develops and grades the Uniform CPA Examination, offers specialized credentials, builds the pipeline of future talent and drives continuing education to advance the vitality, relevance and quality of the profession.


October 26, 2021

The Honorable Ron Wyden
Chairman
U.S. Senate Committee on Finance
219 Dirksen Senate Office Building
Washington, DC 20510

The Honorable Richard Neal
Chairman
U.S. House Committee on Ways and Means
1102 Longworth House Office Building
Washington, DC 20515

The Honorable Mike Crapo
Ranking Member
U.S. Senate Committee on Finance
219 Dirksen Senate Office Building
Washington, DC 20510

The Honorable Kevin Brady
Ranking Member
U.S. House Committee on Ways and Means
1139 Longworth House Office Building
Washington, DC 20515

Re: Title VI, Sec. 80604 of H.R.3684, the Infrastructure Investment and Jobs Act

Dear Chairmen Wyden and Neal, and Ranking Members Crapo and Brady:

As trusted advisors to business, nonprofit, and governmental clients, CPAs are keenly aware of the unprecedented pandemic-related challenges the American economy and its workforce has faced for almost two years. To help Americans weather the pandemic's financial impact, the accounting profession and the American Institute of CPAs (AICPA) have been working hard to improve public understanding of how key provisions in coronavirus relief legislation could be utilized to support small businesses and bolster our economic recovery. While the federal government's efforts to date have blunted economic decline, the colder winter weather and the resulting costs highlight the importance of those relief and recovery provisions — particularly those that assist small employers and their employees.

The AICPA notes that Title VI, Sec. 80604 of H.R.3684, the Infrastructure Investment and Jobs Act, would terminate the employee retention credit (ERC) for employers subject to closure due to COVID-19 by sunsetting its benefits three months early effective October 1, 2021. Pending legislation of this nature is very confusing to taxpayers and their advisers. Many do not understand that the credit continues to be available, and others are reluctant to take advantage of the credit by reducing current payroll tax deposits, fearing that it may be retroactively repealed and penalties for failure to deposit taxes may apply. If the pending legislation moves to enactment, we recommend that there be a committee report directive to the IRS and Treasury to waive any penalties and provide a reasonable, practical method for payment of unpaid employment taxes.

* * * * *

The AICPA is the world's largest member association representing the accounting profession, with more than 428,000 members in the United States and worldwide, and a history of serving the public interest since 1887. Our members advise clients on federal, state, and international tax matters and prepare income and other tax returns for millions of Americans. Our members provide services to individuals, not-for-profit organizations, small and medium-sized businesses, as well as America's largest businesses.

We welcome the opportunity to discuss these comments on the ERC sunset or to answer any questions that you may have. If you have any questions, please contact; Edward Karl, AICPA VP Taxation, at (202) 355-4892, or edward.karl@aicpa-cima.com; Lauren Pfingstag, Director — AICPA Congressional or Political Affairs, at (407) 257-0607, or lauren.pfingstag@aicpa-cima.com; or me at (601) 326-7119 or JanLewis@HaddoxReid.com.

Sincerely,

Jan Lewis, CPA
Chair, AICPA Tax Executive Committee
American Institute of CPAs
Washington, DC

cc:
Members of the Senate Committee on Finance
Members of the House Committee on Ways and Means
Mr. Thomas Barthold, Chief of Staff, Joint Committee on Taxation
The Honorable Janet Yellen, Secretary of the Treasury
The Honorable Lily Batchelder, Assistant Secretary (Tax Policy), Department of the Treasury
The Honorable Charles P. Rettig, Commissioner, Internal Revenue Service
The Honorable William M. Paul, Chief Counsel, Internal Revenue Service

DOCUMENT ATTRIBUTES
Copy RID