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Treasury Says Retention Credit Guidance Will Change

MAY 7, 2020

Treasury Says Retention Credit Guidance Will Change

DATED MAY 7, 2020
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Following Bipartisan Request, Treasury Modifies Employee Retention Tax Credit Eligibility
for Employers Providing Health Benefits for Furloughed Employees

Thursday, May 7, 2020

WASHINGTON — Following requests from bipartisan members of Congress, including Senate Finance Committee Chairman Chuck Grassley (R-Iowa), the Treasury Department today modified its decision to bar employers that continue providing health insurance to furloughed workers from claiming the employee retention tax credit (ERTC).

Treasury Secretary Steven Mnuchin conveyed the department's response on the ERTC via letter received today.

“This is good news for small businesses and workers across the country. This decision will encourage employers to help employees keep their health insurance while temporarily furloughed due to the shutdown. The decision also aligns Treasury's policy with the original congressional intent behind the employee retention tax credit. I appreciate Secretary Mnuchin's responsiveness,” Grassley said.

Separately, the department responded to a bipartisan congressional request, including Chairman Grassley, regarding business deductions related to the Paycheck Protection Program (PPP).

“We still need to fix the issue of deducting business expenses related to the application for PPP loans. It's fully my intention for that issue to get resolved quickly, whether administratively or legislatively, so small businesses maintain as much liquidity as possible during this difficult period,” Grassley continued.

On Monday, Grassley joined Senate Finance Committee Ranking Member Ron Wyden (D-Ore.) and House Ways & Means Chairman Richard E. Neal (D-Mass.) requesting the change to Treasury's interpretation of the ERTC established in the CARES Act.

In the following days, the trio separately pushed for a change in the IRS' and Treasury Department's decision to disallow businesses applying for PPP loans from deducting related expenses, a decision that also contradicted congressional intent.

Grassley also joined colleagues to introduce legislation that would mandate a change in the Treasury Department's and the IRS's position and clarify the small business expense deductions under the Paycheck Protection Program.


May 7, 2020

The Honorable Charles E. Grassley
Chairman
Committee on Finance
United States Senate
Washington, DC 20510

Dear Chairman Grassley:

I write in reply to your May 4, 2020 letter regarding recent guidance issued by the Department of the Treasury and the Internal Revenue Service on how employers should determine the amount of allocable qualified health plan expenses under the employee retention credit offered pursuant to section 2301 of the Coronavirus Aid, Relief, and Economic Security Act. The Department has taken your views under consideration and will be revising the applicable guidance.

If you have further questions, please direct your staff to contact the Office of Legislative Affairs.

Sincerely,

Frederick W. Vaughan
Principal Deputy Assistant Secretary
Office of Legislative Affairs

Identical letter sent to:
The Honorable Richard E. Neal 
The Honorable Ron Wyden

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