- November 8, 2017
- Posted by: Rivero, Gordimer & Company
- Categories: Business Advice, Company News
If your company paid wages to employees directly following the recent string of hurricanes even though your business was inoperable, then you may qualify for a tax credit within the Disaster Tax Relief and Airport and Airway Extension Act of 2017.
What is the Disaster Tax Relief and Airport and Airway Extension Act of 2017?
In 2016, three Category 4 hurricanes made landfall in the U.S. within one month of each other. The aftermath from Hurricanes Harvey, Irma, and Maria caused billions of dollars in damage throughout the country and left many businesses struggling to keep their doors open.
As a result, Ways and Means Chairman Kevin Brady introduced legislation on September 25th to provide temporary tax relief to taxpayers, like yourself, affected by Hurricanes Harvey, Irma, and Maria. Victims of these devastating hurricanes can utilize these tax credits to mitigate the damages and help expedite their recovery.
Chairman Brady issued the following statement on his bill.
“Hundreds of thousands of people throughout Texas, Florida, the U.S. Virgin Islands, Puerto Rico and other areas have been devastated by hurricanes and severe flooding that destroyed their homes, their vehicles, and their workplaces. Today, I’ve released legislation that delivers targeted, meaningful tax relief that will make it easier for people to recover and return home as soon as possible.”
What is the Employee Retention Tax Credit?
Within the Disaster Tax Relief and Airport and Airway Extension Act of 2017 is a specific tax credit that can help many businesses affected by the recent hurricanes. This tax credit is the Employee Retention Tax Credit.
The tax credit is 40 percent of the qualified wages, not exceeding $6,000, paid to each eligible employee while business was inoperable after the hurricane(s). In other words, you can receive a tax credit up to $2,400 for wages paid to each eligible employee while your business was inoperable because of hurricane damage.
Is my business eligible?
For businesses to be eligible for the Employee Retention Credit, they must have retained their employees even when their business was rendered inoperable by Hurricane Harvey, Irma, or Maria.
Employers must have conducted business within the disaster area of the storms and had business operations inoperable any day(s) after the storm and before January 1, 2018. The inoperability must be related to damages caused by the hurricanes on or after the following dates.
- For Hurricane Harvey: August 23rd
- For Hurricane Irma: September 4th
- For Hurricane Maria: September 16th
Eligible employees for this specific tax credit are employees whose principal place of employment is within the disaster areas and was rendered inoperable because of damage caused by one of the storms after the dates mentioned above. It’s important to know that employers cannot obtain the credit for employees who are also family members.
With regards to the eligible wages defined in the legislation, they simply refer to wages paid to eligible employees any time after the employer was unable to operate. The timeline begins the day the employer became inoperable and ends the day operations were no longer impacted by the damage from the hurricane.
Qualified wages and employee eligibility is not dependent on whether employees were able to work during the inoperable period. In other words, wages paid and employees are eligible regardless of whether these employees worked from home, at another location, before full operations were resumed, or if they were unable to work altogether.
What else do I need to know about the Employee Retention Tax Credit?
The Employee Retention Credit will be taken on your 2017 tax return. Additionally, a controlled group of corporations will be treated as a single employer and businesses cannot claim the credit multiple times for the same employee.
One important factor in defining a company’s eligibility status is the term “inoperability” which is not definitively outlined in the Disaster Tax Relief and Airport and Airway Extension Act of 2017. Therefore, if you’re an employer that conducts business inside the disaster areas outlined by FEMA for Hurricanes Harvey, Irma, or Maria, you should contact the Tax Team at Rivero, Gordimer & Company to see if you qualify for any disaster relief breaks.
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