Lawmakers offer bill to expand employee retention tax credit

A bipartisan group of House members on Friday introduced a bill to expand the employee retention tax credit created by the $2.2 trillion coronavirus relief law.

The sponsors of the bill — Reps. Stephanie Murphy (D-Fla.), John Katko (R-N.Y.), Suzan DelBene (D-Wash.), Brian Fitzpatrick (R-Pa.) and Chris Pappas (D-N.H.) — say that their legislation would help to keep workers employed during the pandemic.

“Congress can once again act in this ‘country-first’ spirit by expanding this bipartisan initiative to reduce layoffs, protect workers’ health insurance benefits, and help ensure a quick and robust economic recovery,” Murphy said in a news release.

The coronavirus relief law that President Trump signed in late March allows businesses to receive a payroll tax credit of up to $5,000 per employee for wages and health benefits paid between March 12 and the end of the year.

Businesses are eligible for the credit if they had to fully or partially suspend operations due to the coronavirus or saw a significant decline in gross receipts. Businesses with more than 100 employees in 2019 can receive the credit for wages paid to employees when the employees aren’t providing services, while all wages are eligible for the credit for businesses with 100 employees or fewer.

The lawmakers’ bill would expand the credit in several ways.

It would increase the size of the credits that businesses can receive, allowing employers to receive a credit of 80 percent on the first $15,000 of wages per employee per calendar quarter. It also would raise the threshold for treatment as a large employer from more than 100 employees to more than 1,500 employees or more than $41.5 million in 2019. And it would phase in the credit so that some employers that currently aren’t eligible could receive a portion of the credit.

The bill would specify that health benefits count as qualifying wages for purposes of the credit in cases where companies furlough workers but continue to pay health benefits. The IRS had initially released guidance that said that this wasn’t the case, but then the agency reversed itself after lawmakers said that the initial guidance was not in line with congressional intent.

Additionally, the bill would allow state and local governments to take the credit, and it would allow employers to use both the credit and the Paycheck Protection Program, with guardrails to prevent double-dipping.

“These enhancements are critical to strengthening our economy and saving local jobs amid the COVID-19 pandemic,” Katko said.

The sponsors of the bill hope that it will be included in the next coronavirus relief package that Congress passes.

It’s unclear when the next package will come together and what it will look like. House Democrats are interested in moving quickly on the next bill, but Senate Republicans want to move more slowly and first examine what is working and what isn’t in previous legislation.