Paul J. Durham | April 12, 2021
Since the start of the COVID-19 pandemic, lawmakers have provided significant economic assistance to support struggling businesses. Unfortunately, businesses started during the crisis itself have been ineligible for most of that aid. For example, businesses started after February 15, 2020 remain ineligible for the Paycheck Protection Program, and New Hampshire’s popular Main Street Relief Fund and Self Employed Livelihood Fund were only available to businesses that could show lost revenues when compared to 2019 receipts. With the recent passage of the American Rescue Plan Act of 2021 (“ARP”), business owners should be aware of at least one new opportunity for relief for eligible startups.
Employee Retention Credit (“ERC”) Expansion
Speaking very generally, the ERC is a tax credit that eligible businesses may take on a per employee/per quarter basis against certain payroll taxes. A business is generally eligible for the ERC if it has been subject to a full or partial shut-down or has experienced a decline in gross receipts (50% for 2020 ERC and 20% for 2021 ERC) when compared to its 2019 activities. This means that, to utilize the credit, new businesses must have existed long enough to demonstrate revenue losses or to have been subject to one of the early government shutdown orders.
However, ARP expanded the ERC to cover so-called “recovery start-up businesses.” These are new businesses that began operations after February 15, 2020 and have $1 million or less in average annualized gross receipts. For recovery start-up businesses, the cap on the maximum qualified wages per employee is $50,000 per quarter.
Other ARP Funding
ARP’s ERC expansion is the most obvious example of stimulus aid directed toward start-ups formed during the COVID-19 era. That said, under ARP, significant additional funds will be funneled to the states for use as part of their state-administered stimulus programs. It remains possible that New Hampshire could expand aid or develop new programs in a way that could benefit businesses started in the last twelve months. Check in regularly with your tax and legal advisors as new information becomes available.
This article was originally published by the Portsmouth Chamber of Commerce.