A bipartisan bill that would boost the employee retention tax credit (ERTC) has been introduced in the House, as the U.S. unemployment rate reaches its highest level since the Great Depression.
The Jumpstarting Our Businesses’ Success (JOBS) Credit Act of 2020 would increase the credit from 50 percent to 80 percent of qualified wages and increase the per-employee limitation to $15,000, among several other provisions.
The refundable credit established by the Coronavirus Aid, Recovery, and Economic Security (CARES) Act (P.L. 116-136) currently covers wages up to $10,000 per employee.
The bill, introduced May 8, would also redefine a large employer as a business with more than 1,500 employees, instead of more than 100 employees. The change would expand the wages that qualify for the credit. While all wages paid by an employer with 100 or fewer full-time employees qualify for the credit, large employers can claim wages paid only when an employee isn’t providing services.
“It is incredibly important that as many Americans as possible are able to stay employed and on the payroll during this crisis,” said Rep. Suzan K. DelBene, D-Wash. She cosponsored the bill with fellow Ways and Means Committee member Stephanie N. Murphy, D-Fla., and Reps. John Katko, R-N.Y.; Brian K. Fitzpatrick, R-Pa.; and Chris Pappas, D-N.H.
“Expanding the Employee Retention Tax Credit will further support impacted businesses by covering more of an employee’s salary for longer and deliver relief quickly,” DelBene said in a release.
More businesses would be able to qualify for a portion of the ERTC under the bill through a phasing in of the credit, allowing employers whose gross receipts have declined by more than 20 percent to claim partial credit.
It would also allow state, territory, and tribal employers to claim the credit.
‘Qualified Wages’ Definition Settled
The JOBS Credit Act includes a provision clarifying that qualified wages include qualified health benefits, and employers that pay these health benefits but not regular wages would still qualify for the credit, although this legislative clarification likely won’t be necessary.
The IRS previously released guidance — against the intent of Congress — that said businesses couldn’t claim the ERTC if they weren’t paying regular wages. The move prompted top House and Senate taxwriters to send a May 4 letter to Treasury Secretary Steven Mnuchin asking the agency to reverse the decision.
The IRS ultimately fulfilled lawmakers’ request on May 7 by updating its FAQ to say that “Eligible Employers may treat health plan expenses . . . as qualified wages even if the employees are not working and the Eligible Employer does not pay the employees any wages for the time they are not working.”