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CUs may be eligible to receive the Employee Retention Tax Credit
NAFCU reminds credit unions to see if they qualify for the Employee Retention Tax Credit, a fully refundable tax credit originally provided for under the CARES Act, then subsequently extended and amended under the Consolidated Appropriations Act (CAA) and American Rescue Plan Act (ARPA). Credit unions may be eligible to claim the tax credit for any calendar quarter in 2021.
Credit unions that are eligible for the tax credit in 2021 may receive a credit for 70 percent of qualified wages per employee, per quarter, in addition to employee health benefits, up to $7,000 per employee for each calendar quarter. Under Section 9651 of the ARPA, which passed into law earlier this year, previous portions of the employee retention tax credit provisions were amended, specifically the “federal instrumentality” language NAFCU flagged for lawmakers and the Treasury as problematic because it potentially excluded credit unions from obtaining the credit.
The CAA clarified that federal credit unions, exempt from federal taxation under 501(c)(1), qualify for the credit as long as they meet the following criteria:
- having operations partially or fully suspended during the pandemic; or
- experiencing an over 20 percent decline in gross receipts compared to the same quarter in 2019; and
Of note, the IRS has released guidance on qualified wages paid after Dec. 31, 2020 and before July 1, 2021 as well as additional guidance for wages paid after June 30, 2021 and before January 1, 2022. Eligible wages are determined based on the employers’ average number of full-time equivalent employees (FTEs). Credit unions with fewer than 500 FTEs may be able to include wages paid to both working and non-working employees.
To claim the credit, a credit union must report total qualified wages and related health insurance costs on its quarterly employment tax return, otherwise known as Form 941.
Credit unions may wish to consult with their payroll provider and/or a tax and accounting expert to see if they qualify. NAFCU continues to engage with the IRS to ensure credit unions receive additional opportunities for relief related to the pandemic crisis.