by alliantgroup staff,
December 03, 2021
The COVID-19 pandemic has significantly impacted the construction industry, which is sensitive to economic cycles. But thanks to its potential to create jobs, recovery in the construction industry will also fuel the recovery of the American economy as a whole. With this in mind, Congress introduced the Employee Retention Credit (ERC) for contractors as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020.
ERC can provide significant cash relief in the form of refundable tax credits to construction companies for keeping employees on their payroll throughout the pandemic. Businesses can claim this credit if they have faced any of the following disruptions:
- Reduced crew sizes due to OSHA
- Job site access restrictions
- Project delays
- Permit issues
- Supply chain issues
Unfortunately, many eligible construction companies are disqualifying themselves prematurely from claiming ERC because of misconceptions and outdated guidelines. Here’s what they are getting wrong about the credit’s eligibility:
Misconception #1 – If I’ve already claimed PPP (or had my PPP loans canceled), I can’t claim ERC.
FACT: The restriction on only being able to claim PPP or ERC was removed by Congress in the Consolidated Appropriations Act (CAA) of 2021. Now you can claim both.
Misconception #2 – My construction business is ineligible for ERC because it did not experience a 50% or greater decline in gross receipts.
FACT: The CAA has revised the requirements so that a 20% reduction now qualifies. Furthermore, there are two methods for your construction business to qualify for the ERC. If your business has been suspended in part or whole due to a government order, regardless of whether there was an impact on your revenue, you can still qualify.
Misconception #3 – My construction company did not close during the pandemic, so I shouldn’t consider the Employee Retention Credit
FACT: Even a partial suspension of your firm by the government (federal, state, or municipal) may be eligible. A partial shutdown, a business disruption, inability to access equipment, limited capacity, supply chain or vendor shutdowns, job site restrictions, reduction in crew sizes, shutting down some locations but not others, and shutting down some members of a business are all scenarios that may still qualify for the ERC. Remember that, in addition to the reduction in gross receipts test, partial or full suspension is an alternate route to qualify for the ERC.
Misconception #4 – Because my construction company was declared an essential business, I am ineligible for ERC
FACT: Even essential firms that can demonstrate that they were more than nominally impacted by a governmental order may qualify. For example, if your suppliers were shut down, and you couldn’t get the supplies you needed to keep your business running. It is best to talk to an expert regarding impacts on your business.
Misconception #5 – During quarantine, my company has grown; ERC isn’t anything I should consider
FACT: Congress is still encouraging businesses like yours to claim credits like ERC. The more money that can be put back into the economy, the faster we can get back to growing the economy. You can still qualify if you had to change your operations or if your vendors and clients were impacted.
Congress has expanded the Employee Retention Credit in 2021 to make it accessible to many more construction companies. It can be used to offset or eliminate your payroll tax, hire more employees, or even generate a cash refund. \The time is ripe for contractors to determine their credit eligibility by consulting an expert.