New Hope for Restoring and Fixing the Employee Retention Credit
Tax PlanningAs you may remember, two bad things happened to the Employee Retention Credit (ERC):
- On November 15, 2021, Congress retroactively repealed the ERC for the fourth quarter of 2021 (except for start-up businesses).
- On August 4, 2021, the IRS issued the clearly irrational Notice 2021-49 stating that a corporate owner with certain living relatives does not qualify for the ERC.
In Say Goodbye to the ERC for the Fourth Quarter, you learned that Congress created the fourth-quarter ERC on March 11, 2021, and then on November 15, 2021 (a mere eight months later), changed its mind and retroactively repealed the ERC to September 30, 2021. Outrage is the proper response—and we have some tactics for addressing that coming up.
But first, let’s add IRS Notice 2021-49 to the mix. In Raise Hell: Save Your Employee Retention Credit, you learned that the IRS denied the ERC to corporate-owner employees who have certain living relatives. According to the IRS, if those relatives are alive, you don’t qualify for the ERC, but if they are dead, you qualify.
You have to find three huge problems with IRS Notice 2021-49:
The IRS issued the notice on August 4, 2021, 16 months after enactment of the CARES Act, which created the ERC. Disallowing the deduction after 16 months have passed is a retroactive punch to the gut.
- On November 6, 2020, the IRS issued FAQ 59, which listed the more-than-50-percent owner’s
- relatives who did not qualify for the credit. But FAQ 59 did not disqualify the more-than-50-percent owner or his or her spouse. You can reasonably read this notice, issued eight months after the CARES Act, and conclude the owner qualified for the ERC. That’s what we did in Can You Claim the ERC for the Owner of a C or S Corporation?
- You cannot read IRS Notice 2021-49 and think that the IRS is rational in disallowing the ERC to the corporate owner-employee based on the dead or living relatives. It’s flat-out illogical.
Hope in the House
On December 7, 2021, Rep. Carol D, Miller (R-WV-3) and three co-sponsors offered H.R. 6161, the Employee Retention Tax Credit Reinstatement Act, which would reinstate the ERC for the fourth quarter. On the day it was presented, the House referred the bill to its Committee on Ways and Means—a good thing.
Today, there are 54 bipartisan co-sponsors, whom you will find listed at the end of this article.
The bill has some legs.
Hope in the Senate
On February 10, 2022, Sen. Margaret Wood Hassan (D-NH) along with four co-sponsors introduced S. 3625 (identical to H.R. 6161) in the Senate, where it was read twice and referred to the Senate Committee on Finance.
The bill now has seven co-sponsors, whom you also will find listed at the end of this article. Sen. Hassan and three of the co-sponsors are on the Senate Committee on Finance—a good sign.
Adding Pressure
In a letter dated January 19, 2022, to President Biden and House and Senate leaders, 51 organizations gave a push to H.R. 6161—the Employee Retention Tax Credit Reinstatement Act.
The 51 organizations represent a variety of charitable nonprofits and trade associations whose small-business members (and their employees) need reinstatement of the ERC.
On February 10, 2022, over 70 such organizations issued a press release commending the senators on their introduction of S. 3625—the Employee Retention Tax Credit Reinstatement Act.
Your Turn
Now is a good time to ask the congressional sponsors and co-sponsors to override IRS Notice 2021-49 and allow the ERC on the wages paid to corporate owner-employees. Clarity on this is important to everyone, including the IRS.
And of course, the second thing to note in your phone call or other communication with congressional representatives (time is short, so phone is best) is support for reinstatement of the ERC for the fourth quarter.
Reinstatement is logical.
How to Do It
For Senate and House members who are sponsors and co-sponsors, click the links below to find their Washington, D.C., phone numbers and websites. Because this is moving fast, you will make more headway with a phone call.
Try to make as many phone calls as you can.
Make sure you are clear. When speaking with House members, tell them you want them to both pass H.R. 6161 and write a law that allows the ERC to the corporate-owner employee.
For Senate members, tell them you want them to both pass S. 3625 and write a law that allows the ERC to the corporate-owner employee.
Make as many phone calls as you can. Start with the tax law writers, your senators, and your congressional representative. Here’s contact information for them:
- Richard Neal, Chairman, Committee on Ways and Means, United States House of Representatives (telephone: 1-202-225-5601; fax: 1-202-225-8112; for email and other contact info, click here)
- Kevin Brady, Ranking Member, Committee on Ways and Means, United States House of
- Representatives (telephone: 1-202-225-4901; fax: 1-202-225-5524; for email and other contact info, click here)
- Ron Wyden, Chairman, Committee on Finance, United States Senate (telephone: 1-202-224-5244; fax: 1-202-228-2717; for email and other contact info, click here)
- Mike Crapo, Ranking Member, Committee on Finance, United States Senate (telephone: 1-202-224-6142; fax: 1-202-228-1375; for email and other contact info, click here)
- Your congressional representative (telephone: 1-202-224-3121; for other contact info, click here)
- Your two senators (telephone: 1-202-224-3121; for email and other contact info, click here)
Please note that when you reach out in this way, it often feels as though you are communicating with a black hole and your message is not getting any attention. That’s wrong. Senators and congressional representatives log everything. You are being heard.
Even if you leave a voicemail and receive no reply, know that your voice is being heard.
Senate
Sen. Hassan, Margaret Wood (D-NH), sponsor of S. 3625—Employee Retention Tax Credit Reinstatement Act
Co-sponsor / Date Co-sponsored
2/10/2022
2/10/2022
Sen. Capito, Shelley Moore (R-WV)*
2/10/2022
Sen. Cardin, Benjamin L. (D-MD)*
2/10/2022
2/17/2022
2/17/2022
2/17/2022
* Indicates co-sponsor
House
Rep. Miller, Carol D. (R-WV-3), sponsor of H.R. 6161—Employee Retention Tax Credit Reinstatement Act
Co-sponsor / Date Co-sponsored
Rep. Murphy, Stephanie N. (D-FL-7)*
12/7/2021
12/7/2021
Rep. Sewell, Terri A. (D-AL-7)*
12/7/2021
12/8/2021
12/8/2021
12/8/2021
Rep. Suozzi, Thomas R. (D-NY-3)
12/8/2021
12/8/2021
12/8/2021
12/9/2021
12/9/2021
12/14/2021
Del. Norton, Eleanor Holmes (D-DC-At Large)
12/14/2021
Rep. Manning, Kathy E. (D-NC-6)
12/14/2021
12/14/2021
12/14/2021
Rep. Delgado, Antonio (D-NY-19)
12/14/2021
1/11/2022
1/11/2022
Rep. Demings, Val Butler (D-FL-10)
1/11/2022
Rep. Young, Don (R-AK-At Large)
1/11/2022
Rep. Gonzalez, Anthony (R-OH-16)
1/11/2022
Rep. Blumenauer, Earl (D-OR-3)
1/11/2022
Rep. Houlahan, Chrissy (D-PA-6)
1/11/2022
1/11/2022
Rep. Fitzpatrick, Brian K. (R-PA-1)
1/11/2022
Rep. Rice, Kathleen M. (D-NY-4)
1/11/2022
Rep. Matsui, Doris O. (D-CA-6)
1/11/2022
1/11/2022
1/11/2022
1/11/2022
Rep. Salazar, Maria Elvira (R-FL-27)
1/11/2022
Rep. Welch, Peter (D-VT-At Large)
1/11/2022
1/11/2022
1/11/2022
Rep. McKinley, David B. (R-WV-1)
1/13/2022
1/13/2022
1/13/2022
1/13/2022
Rep. Miller-Meeks, Mariannette (R-IA-2)
1/13/2022
1/13/2022
1/13/2022
Rep. Walorski, Jackie (R-IN-2)
1/20/2022
Rep. Ruppersberger, C. A. Dutch (D-MD-2)
1/20/2022
1/25/2022
1/25/2022
Rep. Carbajal, Salud O. (D-CA-24)
1/25/2022
1/25/2022
Rep. Herrera Beutler, Jaime (R-WA-3)
2/1/2022
Rep. Mooney, Alexander X. (R-WV-2)
2/1/2022
2/1/2022
Rep. Morelle, Joseph D. (D-NY-25)
2/1/2022
2/4/2022
Rep. McHenry, Patrick T. (R-NC-10)
2/7/2022
* Indicates co-sponsor
