Who is eligible to claim the ERTC?
Eligible employers for the ERTC are any employers that carry on a trade or business during the credit period that either:
- Fully or partially suspend operations during the credit period due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
- Experience a significant decline in gross receipts during the calendar quarter.
Full or Partial Suspensions of Operations Due to a Governmental Order Criteria
For purposes of qualifying for the ERTC, “orders from an appropriate governmental authority” include any orders, proclamations, or decrees from any Federal, State, or local government so long as “they limit commerce, travel, or group meetings due to COVID-19 in a manner that affects an employer’s operation of its trade or business”.
If an applicable order comes from an appropriate governmental authority, the order must result in the total or partial suspension of the employer’s trade or business to qualify. A full suspension in operations occurs when the employer’s ability to continue operations has ceased because of an order imposed by an appropriate governmental authority, whereas an employer may be considered to have had a partial suspension of operations if, under the facts and circumstances, more than a nominal portion of its business operations were suspended by a governmental order.
The IRS defines a nominal portion of the business as “either (i) the gross receipts from that portion of the business operations is not less than 10 percent of the total gross receipts (both determined using the gross receipts of the same calendar quarter in 2019), or (ii) the hours of service performed by employees in that portion of the business is not less than 10 percent of the total number of hours of service performed by all employees in the employer’s business (both determined using the number of hours of service performed by employees in the same calendar quarter in 2019).”
Significant Decline in Gross Receipts
For 2020, a significant decline in gross receipts is determined as any quarter in which an employer’s gross receipts were less than 50 percent of its gross receipts in the corresponding calendar quarter in 2019.
For 2021, a significant decline in gross receipts is determined as any quarter in which an employer’s gross receipts were less than 80 percent of its gross receipts in the corresponding calendar quarter in 2019.
For more information on when to file, eligibility requirements, or how to receive the benefit, please get in touch with PM Business Advisors.