Misconceptions about the Paycheck Protection Program (PPP) and the Employee Retention Tax Credit (ERTC) are common among companies. Many believe that they cannot qualify for the ERTC if they opt for a PPP funding round. However, it is possible to take advantage of both types of COVID relief funds, although there may be some interaction between the two programs. The Internal Revenue Bulletin does not include FAQs on this topic, so the information cannot be used as a legal authority in court cases.
An employer may not receive the ERTC if it receives a PPP loan authorized under the CARES Act. Eligible employers who receive a PPP loan, regardless of when it was taken out, cannot apply for the ERTC. Additionally, an employer that is considered a single employer under the aggregation rules cannot receive the ERTC if any member of the employer's aggregate group receives a PPP loan. An employer receiving a PPP loan may not receive an ERTC, regardless of if and when the loan is forgiven.
An acquiring employer that purchases the assets of a target employer that has received a PPP loan will not be considered to have received a PPP loan by virtue of the acquisition of assets, provided that the acquiring employer does not assume the obligations of the target employer under the PPP loan. In this case, the acquiring employer may apply for the ERTC after the closing date of the transaction if they meet all requirements. Any ERTC requested by an acquiring employer for qualified wages paid before the closing date will not be subject to recovery under section 2301 (l) () (of the CARES Act). If, as part of the acquisition of assets and liabilities of the target employer, the acquiring employer assumes obligations of the target employer under the PPP loan after closing date, they will generally not be considered to have received a PPP loan, provided that they have not received one before or on closing date.
However, salaries that can be considered qualifying wages after closing date will be limited. Specifically, wages paid by acquiring employer after closing date to any person employed by target employer on closing date will not be considered qualifying wages. Yes, but not for same wage payments. Any qualifying salary for which an eligible employer applies for ERTC will not be considered for purpose of determining section 45S credit. Therefore, an employer cannot request credit under section 45S with respect to qualified wages for which they are requesting ERTC, but may request credit under section 45S with respect to any additional wages paid, provided requirements of section 45S with respect to additional wages are met.
An eligible employer cannot apply for ERTC and Work Opportunity Tax Credit (WOTC) for same employee for same period of time. The Consolidated Appropriations Act allows employers who receive a PPP loan to be eligible for ERTC. Different salaries must be used when applying for each program. Both PPP and ERTC offer tax-free cash but there are certain tax variations between two programs that should be considered before determining how to continue. The salaries that determine eligibility for ERTC or PPP loan forgiveness may be part of one of two programs, not both.