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IRS Guidance Likely on Repeal of Employee Retention Credit

Posted on Nov. 22, 2021

The IRS expects to publish guidance addressing the retroactive repeal of a tax credit established to help businesses and nonprofit employers survive adverse economic consequences of the COVID-19 pandemic.

The IRS has heard the concerns of many employers about the sunset of the employee retention credit for the fourth quarter of 2021 for organizations other than recovery start-up businesses, Rachel Leiser Levy, IRS associate chief counsel (employee benefits, exempt organizations, and employment taxes), said November 19. The early termination of the credit was part of the Infrastructure Investment and Jobs Act (P.L. 117-58), signed into law November 15.

“Rest assured, we are aware of this problem,” Leiser Levy said during a TEGE Exempt Organizations Council program. “We were aware of the problem when we saw the legislative language. We are more aware of the problem now, as many, many people have reached out to us to share their consternation. We understand it.”

Leiser Levy noted that “we’re already in the fourth quarter, and there are employers that planned on claiming the credit.”

“What I can assure everybody . . . is that we do anticipate providing further information and guidance addressing these changes as soon as possible,” Leiser Levy said. “It is a very, very high-priority item for us.”

Leiser Levy’s comments are likely to be welcomed by tax professionals who have called for guidance to help employers that have already claimed the ERC for the fourth quarter.

Nonprofit employers have also opposed the fourth-quarter termination of the ERC.

In a November 9 letter to Senate Finance Committee Chair Ron Wyden, D-Ore., David L. Thompson of the National Council of Nonprofits and Jim White of the Nonprofit Association of Oregon said preliminary results of a survey on nonprofit workforce shortages show that charitable organizations in Oregon are using the ERC to retain employees and that loss of the credit will cause more layoffs and leave more Oregonians without needed services.

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