For the Defense - Vol. 7, Issue 2 - 26

Law Firms Should Analyze
Their Eligibility for the
Employee Retention Credit
Stephen J. Pieklik
T
he federal government rolled out several
extraordinary programs to bolster the U.S. economy
during the COVID-19 pandemic. One of the
cornerstones of the Coronavirus Aid, Relief, and Economic
Security Act1
(the " CARES Act " ) that was signed into law
in March of 2020 was the Payroll Protection Program
( " PPP " ). This program provided payroll grants in the form
of forgivable loans to employers equal to 2.5 times their
average monthly payroll costs (subject to certain wage
and other limitations). PPP loans were generally only
available to employers with less than 500 employees.
Employers with 500 employees or more were limited to
the somewhat-less-attractive employee retention credit.
Under the CARES Act, those businesses which obtained
PPP loans could not also apply for the employee retention
credit. However, the Consolidated Appropriations
Act, 20212
(the " CAA " ), which was signed into law in
December of 2020, allowed employers to claim the
employee retention credit even when they also obtained
PPP loans. In addition to opening the eligibility, the CAA
also significantly increased the amount of the credit.
As a result of the changes to the employee retention
credit by the CAA, every employer-even law firms-
should review their eligibility for this credit as they may be
eligible to receive a cash refund of up to $26,000 per W-2
employee, regardless of whether the employer received a
PPP loan.
26 For The Defense l Vol. 7, Issue 2
Overview of the Credit
As provided by the earlier CARES Act, the employee
retention credit provided employers with a credit, for the
period between March 13, 2020 and December 31, 2020,
equal to 50% of the first $10,000 of wages and health
care costs paid by employers who:
(a) suffered a significant decline in gross receipts
(generally 50%); or
(b) suffered a full or partial suspension
of operations as a result of one or more
government orders limiting commerce, travel
or group meetings due to COVID-19.
If an employer averaged more than 100 full-time
employees during 2019, the credit was generally limited
to wages and health care costs paid to employees who
were unable to work because the employer's operations
were fully or partially suspended.
If an employer averaged 100 or fewer full-time employees
during 2019, the credit was available for qualified wages
and health care costs paid to all employees, and not just
those employees who were unable to work because an
employer's operations were suspended.
The CAA turbocharged the employee retention credit.
For the period between January 1, 2021 and September 30,
2021: 1) the credit percentage was increased from 50% to
70% of wages and health care costs; 2) the wage limit was

For the Defense - Vol. 7, Issue 2

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