The Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) issued a safe harbor on Aug. 10, 2021, allowing employers to exclude certain items from their gross receipts solely for determining eligibility for the Employee Retention Credit (ERC).

According to the Revenue Procedure 2021-33, the amounts that can be excluded include:

  • The forgiveness of a Paycheck Protection Program (PPP) loan;
  • Shuttered Venue Operators Grants under the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act; and
  • Restaurant Revitalization Grants under the American Rescue Plan Act of 2021

An employer elects to apply the safe harbor by excluding these amounts solely for determining whether it is an eligible employer for a calendar quarter for purposes of claiming the ERC on its employment tax return.

Revenue Procedure 2021-33 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 this safe harbor, and the safe harbor does not permit the exclusion of these amounts from gross receipts for any other federal tax purpose.

Doeren Mayhew’s tax advisors will continue to closely monitor pending legislation related to the ERC and will provide additional information as needed. To obtain assistance with the ERC or to help determine eligibility, contact us today.