October 28, 2021
*This article was updated on November 15, 2021
The Employee Retention Credit (“ERC”) is a cash refund through payroll tax that is available to churches and non-profit organizations that:
While many employers have some familiarity with the ERC, confusion exists around the qualifications and application processes.
Your organization may qualify for four separately calculated ERCs:
Tax exempt organizations that experience fully or partially suspended operations due to orders from an appropriate governmental authority to limit commerce, travel, or group meetings due to COVID-19 can qualify as Eligible Employers for purposes of the ERC. The period that the employer pays qualified wages lasts as long as the government mandates are in effect.
In the first, second and third quarters of 2021, to the extent the gross receipts of the organization are more than 20% down from the gross receipts of the organization in the same calendar quarter of 2019, the organization will qualify as an Eligible Employer. The gross receipts decline requirements for 2020 are more difficult to meet due to the requirement to show a greater than 50% decline.
For purposes of the 2020 ERC, religious organizations with 100 or fewer full-time employees (as measured, on average, in 2019) are entitled to the maximum benefits available under the ERC calculations, if they remain an Eligible Employer under either the Government Mandate Test or the Gross Receipts Test. This rule was liberalized for purposes of the 2021 ERCs by increasing the full-time employee threshold to 500 or fewer.
Religious organizations that received Paycheck Protection Program (“PPP”) loans also can qualify for the ERC. When the ERC was first authorized as part of the CARES Act, any organization that received funding under PPP was statutorily prohibited from claiming an ERC. Later, in December 2020, when the ERC was extended and enhanced as part of the Consolidated Appropriations Act, the statutory prohibition against PPP recipients claiming ERC benefits was removed.
The information that religious organizations need to provide when applying for the ERC include the following:
All religious organizations should consider reviewing their eligibility for ERC. Due to the substantial number of government orders limiting the normal activities in 2020 and 2021, many organizations are receiving substantial cash benefits, in addition to PPP benefits already received.
Learn more about the Employee Retention Credit and receive guidance to qualify for the credit by contacting your Cherry Bekaert advisor or Martin Karamon, Tax Principal and leader of Cherry Bekaert’s ERC Services Team.
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“Cherry Bekaert” is the brand name under which Cherry Bekaert LLP and Cherry Bekaert Advisory LLC provide professional services.
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