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Employee Retention Credit (“ERC”)

This Consolidated Appropriations Act (CAA), 2021 signed by the President on December 27, 2020 states an employer that receives a PPP loan is no longer prohibited from claiming the ERC.  However, an ERC may not be claimed for wages paid with proceeds of a PPP loan that have been forgiven.


The ERC is a fully refundable tax credit available to companies with 500 or fewer FTEs (in 2019)

  • Maximum benefit of $5,000 per employee in 2020 (100 or fewer FTEs)
  • Maximum benefit of $21,000 per employee in 2021 (500 or fewer FTEs)
Aerial View of Young Business Friends Discussing the Project at the Worktable.

Qualifying criteria for 2020

  • 100 or fewer FTEs (in 2019)
  • Effective 3/13/2020 through 12/31/20
  • A 50% drop in gross receipts in Q2, Q3 or Q4 in 2020 vs. same quarter in 2019
    • OR, employer meets qualitative test

Qualifying criteria for 2021

  • 500 or fewer FTEs (in 2019)
  • Effective 1/1/2021 through 9/30/2021
  • A 20% drop in gross receipts in Q4 of 2020 or any quarter in 2021 vs. same quarter in 2019
    • OR, employer meets the qualitative test

Qualitative test

Employer was either fully or partially suspended by a COVID-19 lockdown order.  A few examples include:

  • A restaurant maintained steady revenue due to strong drive through, curbside pick-up or delivery, however, indoor dining was closed or at limited capacity due to a governmental order.
  • A company’s supply chain providing materials, parts or equipment has been disrupted (delays, need for alternative supplier) due to governmental orders.
  • Sales metrics have been impacted as trade shows and conferences have been cancelled, travel was significantly limited, customer projects were delayed or cancelled - all due to governmental orders.  This resulted in a significant shortfall of forecast vs. actual revenue.
  • Employer has experienced a drop in productivity due to governmental orders requiring employees to stay at home, social distance, implement cleaning protocol.