The Consolidated Appropriations Act (CCA), passed at the end of December 2020, made substantial changes to the Employee Retention Credit. The most significant change is that PPP borrowers can now claim the credit, subject to certain eligibility requirements and with the understanding that wages funded by forgiven PPP loan proceeds cannot be used to calculate the credit.
When the CARES Act was passed, a nonprofit organization that received a Paycheck Protection Program (PPP) loan was ineligible to claim the employee retention credit. The CAA repealed this requirement retroactive to the date of the CARES Act enactment. A nonprofit organization that received or receives a PPP loan is no longer prohibited from claiming the employee retention tax credit.
In addition, the credit was originally set to expire on Dec. 31, 2020. The credit has been extended and expanded for the first two quarters in 2021. Nonprofit organizations should review their situation to determine if the credit is available. Below is a summary of a few key requirements of the Employee Retention Credit. Additional guidance from the IRS is expected.
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