Details of Public Law 116-260, section 206 , Clarifications and Technical Improvements to CARES Act Employee Retention Credit

Wages paid after 3/12/2020

In addition, certain amounts from earlier quarters may be claimed in the fourth quarter of 2020. This will apply only for employers that did not apply the law consistently with the retroactive changes.

The provision allows employers that received Paycheck Protection Program (PPP) loans to also claim the employee retention credit (ERC) on qualified wages. However, an employer may not receive a double benefit by claiming the ERC on wages that the employer paid with forgiven and excluded PPP loan proceeds. Also, employers are not allowed to deduct from income the portion of qualified wages that equal the ERC amount.

The provision clarifies that “qualified health plan expenses” paid by an employer are eligible for the ERC even if such health plan costs are attributable to furloughed employees who are not receiving any other wages from their employer.

The provision clarifies that tax-exempt organizations determining eligibility for the ERC under the “gross receipts” test must account for all gross receipts within the meaning of IRC Section 6033, and not only gross receipts from unrelated trade or business activities.