The CARES Act to the Rescue
How the employee retention tax credit can help businesses
One of the most beneficial (and more complicated) business tax provisions in the CARES Act is the Employee Retention Credit for Employers Subject to Closure Due to COVID-19 ("Retention Credit"). The Retention Credit is expected to provide employers with a meaningful financial incentive to keep employees on the payroll during the pandemic crisis.
An employer is eligible for the Retention Credit if the employer satisfies one of two tests:
- Operational disruption: The business's operations are fully or partially disrupted because of a government order limiting commerce and travel as a result of COVID-19.
- Gross receipts: Gross receipts for a quarter in year 2020 are less than 50% of gross receipts for the same quarter in 2019, with eligibility ceasing following a quarter in which the employer's gross receipts are greater than 80% of the previous year's quarterly gross receipts.
The gross receipts test is not available to tax-exempt organizations, however. These organizations must satisfy the operational disruption test to qualify.
Please select this link to read the complete article from Venable, LLP.