Infrastructure Legislation Terminates ERTC

The Infrastructure Investment and Jobs Act was signed into law on November 15. While most of the legislation is related to investing in the nation’s infrastructure, there were a couple of tax provisions included in the bill.

Here’s what you should know about two of those tax provisions: one affecting businesses and the other affecting brokers of cryptoassets.

Employee Retention Tax Credit Is Terminated

The more sweeping tax provision is the termination of the Employee Retention Tax Credit (ERTC).

Originally available only for the 2020 tax year, the ERTC was further expanded to the first two quarters of 2021, then for the entirety of 2021. But now, with the passage of the infrastructure bill, the ERTC is set to expire at the end of the third quarter of 2021. This means that wages paid after September 30, 2021 will not be available for the credit.

The objective of the ERTC was to give a tax credit to employers who either had a significant decline in revenue compared to 2019 or were shut down due to the pandemic. For 2020, eligible employers were able to receive a 50% credit for up to $10,000 of qualified wages per employee. In 2021, the credit was greatly expanded to allow eligible employers to receive a credit of 70% up to $10,000 of qualified wages per employee for each quarter.

There are two things to keep in mind as the ERTC goes away:

1. While the availability of this credit terminates as of September 30, 2021, you have up to three years to go back and amend any payroll returns to take advantage of the Employee Retention Tax Credit.
   
   
2. The early termination of the ERTC does not apply to recovery start-up businesses. Recovery start-up businesses are businesses that began operating after February 15, 2020 and have average gross receipts of $1 million or less. The ERTC aggregation rules do apply to the $1 million dollar threshold and gross receipts for all related entities with common ownership must be taken into account as well. For recovery start-up businesses, the amount of ERTC available is up to $50,000 total per quarter for the third and fourth quarters of 2021, and they do not need to have suspended operations or reduced receipts.

Cryptoasset Reporting Will Be Required of Brokers

There will be new cryptoasset information reporting requirements on brokers.

The infrastructure legislation expands the definition of “broker” to include anyone who operates a trading platform for cryptocurrency and digital assets. A “digital asset” is defined as “any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology.”

Additional Tax Provisions In the Legislation

Although they won’t affect too many taxpayers, the legislation also:

• Extends several excise taxes used to fund highway spending including sales of heavy trucks and trailers, fuel and tires
• Extends and modifies certain superfund excise taxes
• Allows the use of private activity bonds for qualified broadband projects and carbon dioxide capture facilities
• Extends pension funding relief
• Expands certain IRS administrative relief for taxpayers affected by federally declared disasters

Are There More Tax Changes Ahead?

There will likely be many tax provisions in the Build Back Better Act. If the $1.75 trillion bill is signed into law, there will be significant impact to taxpayers. We’re keeping an eye on this legislation and will pass along insight as it becomes available.

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