Preserving the Employee Retention Tax Credit for Nonprofits

Don’t Leave ERTC Money for Your Mission on the Table Nonprofits not taking advantage of the ERTC are likely “leaving money on the table.” Let’s change that. The ERTC is a refundable payroll tax credit based on wages paid to employees at organizations that either (1) have been fully or partially shut down due to a government order OR (2) had gross receipts decline a certain percentage less than those in the same calendar quarter of 2019. Yes, you or accounting/payroll professionals have to make some calculations, but the time spent can be well worth it. The maximum credit for 2020 is up to $5,000 per employee, and for 2021 it is up to $7,000 per employee per calendar quarter. Learn more about claiming the credit for 2020 expenses and for 2021 expenses.

The Employee Retention Tax Credit (ERTC) has proven to be an essential tool for nonprofits to keep staff on the payroll since it was first enacted in the CARES Act in March 2020 and improved later in two separate laws. Its status, however, is in doubt because Congress is under the misimpression that employers – predominantly for-profit businesses – haven’t found it helpful or believe it too complicated to use. (See box at right for why nonprofits should apply for the ERTC.) If nonprofits don’t speak up now – loudly – the important support will disappear because Congress is set to repeal the ERTC for the Fourth Quarter of 2021 as part of the bipartisan infrastructure legislation.

Nonprofits across the country are mobilizing to preserve and extend the ERTC for charitable organizations. Last month, three dozen national nonprofits sent a Letter to Congressional Leaders asking them to preserve the ERTC for nonprofits this year and into 2021, pointing out that past “relief for charitable organizations has fallen short” compared to the funds distributed to for-profit businesses. Specifically, nonprofits are calling on Congress to prioritize continued support for nonprofits by (1) allowing charitable organizations to access the ERTC during the Fourth Quarter of 2021; (2) extending nonprofit eligibility for the ERTC through 2022 to help ensure a strong economic recovery from the pandemic; and (3) amending the definition of nonprofit “gross receipts” for the ERTC program to better reflect revenue available to support nonprofits amid the pandemic.”

State associations of nonprofits have also taken the case to their lawmakers. The Nonprofit Association of Oregon recently sent a letter signed by 130 nonprofits across the state to Senate Finance Committee Chair Wyden (D-OR) seeking his “support for urgent relief through retention and improvement of the ERTC in budget reconciliation that will enable charitable organizations to contribute to our nation’s relief, recovery, and rebuilding.”

Massachusetts Nonprofit Network and Providers’ Council sent a letter to House Ways and Means Committee Chair Neal (D-MA) arguing for support for extension and expansion of the ERTC by citing examples of Massachusetts nonprofits that have taken advantage of the incentive. The letter warns, “Taking away the ERTC before the end of the year will absolutely lead to layoffs and a reduction of vital services our fellow residents need.” Further, the letter from the CEOs of the nonprofit associations explains, “Extending the ERTC into 2022 and adjusting the definition of ‘gross receipts’ to more realistically reflect how nonprofits operate would ensure that charitable organizations continue to meet the challenges that Massachusettsans will face well after the pandemic is finally beaten.”

Similar letters from the Alliance of Arizona Nonprofits and the West Virginia Nonprofit Association to Senators Sinema (D-AZ) and Manchin (D-WV) urged them to “fight on behalf of charitable nonprofits by working to ensure that these employers remain eligible to utilize the Employee Retention Tax Credit through the fourth quarter of this year and into 2022.” Likewise, the Center for Non-Profits in New Jersey and the Pennsylvania Association of Nonprofit Organizations called on Representatives Gottheimer (D-NJ) and Fitzpatrick (R-PA), the leaders of the bipartisan Problem Solvers Caucus, calling on them “to advance the interests of our communities’ charitable non-profits and those they serve by negotiating the extension and expansion of the Employee Retention Tax Credit in reconciliation and other legislation on which you are working.”

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Nonprofit Advocacy in Action

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Employee Retention Tax Credit

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