September 2, 2021
By Sarah Huang, CPA, MST, Clark Nuber, PS
When additional Employee Retention Credit (ERC) guidance was provided in March 2021, the Notices clarified wages utilized for Paycheck Protection Program (PPP) loan forgiveness are not eligible for the ERC.
We assumed this double dipping prohibition would extend to post-CARES Act COVID relief programs, such as the Shuttered Venue Operator Grants (SVOG) and the Restaurant Revitalization Fund (RRF). However, Notice 2021-49 provides guidance that indicates otherwise.
RRF and SVOG Wage Double Dipping Permitted for 2020 and 2021 Q1 and Q2
For RRF and SVOG recipients, coordination between these and the other COVID programs (PPP, ERC, etc.) has been challenging. Many organizations are keeping meticulous records to ensure expenses are properly allocated to the programs to optimize all relief options available.
Notice 2021-49 changes things up. Now, wages allocated to the RRF and SVOG programs are also allocable to the ERC. The double dipping prohibitions that apply to other programs are not applicable here. Note this double dipping prohibition ONLY applies to 2020 and 2021 Q1/Q2. Wages and health insurance costs incurred during 2021 Q3 and Q4 are NOT eligible for double dipping.
The reason given by the IRS is that the CARES Act (March 2020) governs the ERC for 2020 and the first two quarters of 2021. The SVOG program was created by the Consolidated Appropriations Act in December 2020. The RRF program was created by the American Rescue Plan Act in March 2021. Since both the SVOG and RRF programs were formed after the CARES Act, any double dipping prohibition in the CARES Act does not apply to these two programs.
No Changes to PPP Double Dipping Prohibition
Notice 2021-49 did not change the double dipping prohibition for PPP loans. PPP loans were created in the CARES Act, therefore the double dipping rules apply between the ERC and the PPP.
Planning Opportunities for RRF and SVOG Recipients
If you received funding from the RRF or SVOG programs, use this additional guidance as an opportunity to maximize your relief benefits. If you need to allocate wages to these programs, do it during time periods where double dipping is permitted. Just be sure to not allocate wages used for the PPP loan, if applicable. Taking advantage of this double dipping will allow RRF and SVOG recipients to maximize the ERC in 2021 Q3 and Q4 when wages can only be counted towards one COVID relief program.
If you have questions on any COVID-19 relief options, please contact your advisor at Clark Nuber for further assistance.
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