Details of Public Law 116-260, section 303 , Employee Retention Credit for Employers Affected by Qualified Disasters

The provision allows a credit of up to $2,400 per employee to employers impacted by qualified disasters if the employer:

Had an active trade or business at the time of the disaster, located in a qualified disaster zone and rendered inoperable as a result of the disaster, and

Continued to pay wages to eligible employees that were employed at the location immediately before the disaster.

Employers must claim the general business credit for the taxable year qualified wages were paid to the employee. The credit equals 40 percent of wages, with a maximum of $6,000 per employee, paid to or incurred for an eligible employee:

Beginning on the date on which the trade or business first became inoperable as a result of the disaster at the employee’s principal place of employment immediately before the disaster, and

Ending on the earlier of: The date on which the trade or business resumed significant operations at the employee’s principal place of employment, or 150 days after the last day of the disaster incident period.

Employers cannot claim the qualified disaster credit for wages for which certain other credits are claimed, including the Coronavirus, Aid, Relief, and Economic Security Act (CARES Act), employee retention credit.

Non-governmental tax-exempt organizations, with the exception of certain public colleges, universities and hospitals, may claim the credit against Social Security tax.

Employers may elect for these provisions not to apply. In addition, the provision requires the Secretary of Treasury to issue guidance providing that if an election is made, payroll costs paid or incurred during the covered period can be considered qualified wages to the extent that a covered loan of the eligible employer is not forgiven by reason of a decision under section 7A(g) of the Small Business Act.

Also, employers are not allowed to deduct from income the portion of qualified wages that equal the employee retention credit amount.

This provision also amends the Paycheck Protection Program (PPP) to exclude qualified wages taken into account in determining the Employee Retention Credit (ERC) for Employers Affected by Qualified Disasters or Payroll Tax Credit for Certain Tax-Exempt Organizations from payroll costs.