Employee retention tax credit for suspended business operations

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October 2017

Overview

President Trump on September 29, 2017 signed into law the Disaster Tax Relief and Airport and Airway Extension Act of 2017 (Act). Section 503 of the Act provides an employee retention tax credit for ‘qualified wages’ paid by ‘eligible employers’ with interrupted business operations due to Hurricanes Harvey, Irma, and Maria. The credit will be treated as a general business credit for purposes of Section 38(b) of the Internal Revenue Code (Code). Taxpayers that continued to pay wages to employees despite an inoperable trade or business due to one of the hurricanes have an opportunity to recoup some of those costs through the 2017 tax credit and should take steps to determine eligibility for the credit.

Employers have an opportunity to recover expenses associated with wages paid to employees for certain periods during which their businesses were inoperable as a result of Hurricanes Harvey, Irma, and Maria. Companies and organizations should begin gathering payroll documentation and records for potentially affected periods and anticipate further guidance to be provided by the IRS with respect to claiming the 2017 employee retention tax credit.

See our Hurricane and disaster relief page for more information on Hurricanes Harvey, Irma, and Maria relief.

The takeaway

Employers have an opportunity to recover expenses associated with wages paid to employees for certain periods during which their businesses were inoperable as a result of Hurricanes Harvey, Irma, and Maria. Companies and organizations should begin gathering payroll documentation and records for potentially affected periods and anticipate further guidance to be provided by the IRS with respect to claiming the 2017 employee retention tax credit.

Contact us

Kevin Brown

Principal, Tax Controversy and Regulatory Services Leader, PwC US

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