Treasury, IRS Provide Gross Receipts Safe Harbor for Employers Claiming Employee Retention Credit
The U.S. Department of the Treasury and the IRS recently issued Revenue Procedure 2021-33, providing a safe harbor allowing employers to exclude certain amounts from gross receipts solely for determining eligibility for the Employee Retention Credit (ERC).
The amounts for which an employer may elect to apply the safe harbor are the amount of the forgiveness of a Paycheck Protection Program (PPP) Loan, Shuttered Venue Operators Grants and Restaurant Revitalization Grants.
The new guidance requires employers to apply the safe harbor consistently for determining eligibility for the ERC. The employer must exclude the amounts from their gross receipts for each calendar quarter in which gross receipts are relevant to determining eligibility to claim the ERC. The employer claiming the credit must also apply the safe harbor to all employers treated as a single employer under the aggregation rules.
An employer is not required to apply the safe harbor, and the safe harbor does not permit the exclusion of these amounts from gross receipts for any other federal tax purpose.
Revenue Procedure 2021-33 updates and amplifies guidance provided in Notice 2021-20, Notice 2021-23 and Notice 2021-49. The Treasury and the IRS stated they will continue to closely monitor pending legislation related to the ERC and will provide additional information as needed.