Payroll credit for certain fixed expenses of employers subject to closure by reason of COVID-19

(a)

In general

In the case of an eligible employer, there shall be allowed as a credit against applicable employment taxes for each calendar quarter an amount equal to 50 percent of the qualified fixed expenses paid or incurred by such employer during such calendar quarter.(b)

Limitations and refundability

(1)

Limitation

The qualified fixed expenses which may be taken into account under subsection (a) by any eligible employer for any calendar quarter shall not exceed the least of—(A)the qualified fixed expenses paid by the eligible employer in the same calendar quarter of calendar year 2019,(B)$50,000; or(C)the greater of—(i)25 percent of the wages paid with respect to the employment of all the employees of the eligible employer for such calendar quarter; or(ii)6.25 percent of the gross receipts of the eligible employer for calendar year 2019.(2)

Credit limited to certain employment taxes

The credit allowed by subsection (a) with respect to any calendar quarter shall not exceed the applicable employment taxes for such calendar quarter (reduced by any credits allowed under subsections (e) and (f) of section 3111 of such Code, sections 7001 and 7003 of the Families First Coronavirus Response Act, section 2301 of the CARES Act, and sections 101, 102, and 304 of this division, for such quarter) on the wages paid with respect to the employment of all the employees of the eligible employer for such calendar quarter.(3)

Refundability of excess credit

(A)

In general

If the amount of the credit under subsection (a) exceeds the limitation of paragraph (2) for any calendar quarter, such excess shall be treated as an overpayment that shall be refunded under sections 6402(a) and 6413(b) of the Internal Revenue Code of 1986.(B)

Treatment of payments

For purposes of section 1324 of title 31, United States Code, any amounts due to an employer under this paragraph shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section.(c)

Definitions

For purposes of this section—(1)

Applicable employment taxes

The term applicable employment taxes means the following:(A)The taxes imposed under section 3111(a) of the Internal Revenue Code of 1986.(B)So much of the taxes imposed under section 3221(a) of such Code as are attributable to the rate in effect under section 3111(a) of such Code.(2)

Eligible employer

(A)

In general

The term eligible employer means any employer—(i)which was carrying on a trade or business immediately prior to the suspension described in clause (iii)(i) or immediately prior to the period described in subparagraph (B);(ii)which had either—(I)not more than 1,500 full-time equivalent employees (as determined for purposes of determining whether an employer is an applicable large employer for purposes of section 4980H(c)(2) of the Internal Revenue Code of 1986) for calendar year 2019; or(II)not more than $41,500,000 of gross receipts in the last taxable year ending in 2019; and(iii)with respect to any calendar quarter, for which— (I)the operation of the trade or business described in clause (i) is fully or partially suspended during the calendar quarter due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to the coronavirus disease 2019 (COVID–19); or(II)such calendar quarter is within the period described in subparagraph (B).(B)

Significant decline in gross receipts

The period described in this subparagraph is the period—(i)beginning with the first calendar quarter beginning after December 31, 2019, for which gross receipts (within the meaning of section 448(c) of the Internal Revenue Code of 1986) for the calendar quarter are less than 80 percent of gross receipts for the same calendar quarter in the prior year; and(ii)ending with the calendar quarter following the first calendar quarter beginning after a calendar quarter described in clause (i) for which gross receipts of such employer are greater than 80 percent of gross receipts for the same calendar quarter in the prior year.(C)

Tax-Exempt organizations

In the case of an organization which is described in section 501(c) of the Internal Revenue Code of 1986 and exempt from tax under section 501(a) of such Code—(i)clauses (i) and (iii)(I) of subparagraph (A) shall apply to all operations of such organization; and(ii)any reference in this section to gross receipts shall be treated as a reference to gross receipts within the meaning of section 6033 of the Internal Revenue Code of 1986.(D)

Phase-in of credit where business not suspended and reduction in gross receipts less than 50 percent

(i)

In general

In the case of any calendar quarter with respect to which an eligible employer would not be an eligible employer if subparagraph (B)(i) were applied by substituting 50 percent for 80 percent, the amount of the credit allowed under subsection (a) shall be reduced by the amount which bears the same ratio to the amount of such credit (determined without regard to this subparagraph) as—(I)the excess gross receipts percentage point amount; bears to(II)30 percentage points.(ii)

Excess gross receipts percentage point amount

For purposes of this subparagraph, the term excess gross receipts percentage point amount means, with respect to any calendar quarter, the excess of—(I)the lowest of the gross receipts percentage point amounts determined with respect to any calendar quarter during the period ending with such calendar quarter and beginning with the first calendar quarter during the period described in subparagraph (B); over(II)50 percentage points.(iii)

Gross receipts percentage point amounts

For purposes of this subparagraph, the term gross receipts percentage point amount means, with respect to any calendar quarter, the percentage (expressed as a number of percentage points) obtained by dividing—(I)the gross receipts (within the meaning of subparagraph (B)) for such calendar quarter; by(II)the gross receipts for the same calendar quarter in calendar year 2019.(3)

Qualified fixed expenses

(A)

In general

The term qualified fixed expenses means the payment or accrual of any covered mortgage obligation, covered rent obligation, or covered utility payment. Such term shall not include the prepayment of any obligation for a period in excess of a month unless the payment for such period is customarily due in advance.(B)

Application of definitions

The terms covered mortgage obligation, covered rent obligation, and covered utility payment shall each have the same meaning as when used in section 1106 of the CARES Act.(4)

Secretary

The term Secretary means the Secretary of the Treasury or the Secretary’s delegate.(5)

Wages

(A)

In general

The term wages means wages (as defined in section 3121(a) of the Internal Revenue Code of 1986) and compensation (as defined in section 3231(e) of such Code). For purposes of the preceding sentence (other than for purposes of subsection (b)(2)), wages as defined in section 3121(a) of such Code shall be determined without regard to paragraphs (1), (8), (10), (13), (18), (19), and (22) of section 3121(b) of such Code.(B)

Allowance for certain health plan expenses

(i)

In general

Such term shall include amounts paid or incurred by the eligible employer to provide and maintain a group health plan (as defined in section 5000(b)(1) of the Internal Revenue Code of 1986), but only to the extent that such amounts are excluded from the gross income of employees by reason of section 106(a) of such Code.(ii)

Allocation rules

For purposes of this section, amounts treated as wages under clause (i) shall be treated as paid with respect to any employee (and with respect to any period) to the extent that such amounts are properly allocable to such employee (and to such period) in such manner as the Secretary may prescribe. Except as otherwise provided by the Secretary, such allocation shall be treated as properly made if made on the basis of being pro rata among periods of coverage.(6)

Other terms

Except as otherwise provided in this section, any term used in this section which is also used in chapter 21 or 22 of the Internal Revenue Code of 1986 shall have the same meaning as when used in such chapter.(d)

Aggregation rule

All persons treated as a single employer under subsection (a) or (b) of section 52 of the Internal Revenue Code of 1986, or subsection (m) or (o) of section 414 of such Code, shall be treated as one employer for purposes of this section.(e)

Denial of double benefit

For purposes of chapter 1 of such Code, the gross income of any eligible employer, for the taxable year which includes the last day of any calendar quarter with respect to which a credit is allowed under this section, shall be increased by the amount of such credit.(f)

Certain governmental employers

(1)

In general

The credit under this section shall not be allowed to the Federal Government, the government of any State, of the District of Columbia, or of any possession of the United States, any tribal government, or any political subdivision, agency, or instrumentality of any of the foregoing.(2)

Exception

Paragraph (1) shall not apply to any organization described in section 501(c)(1) of the Internal Revenue Code of 1986 and exempt from tax under section 501(a) of such Code.(g)

Election To not take certain expenses into account

(1)

In general

If an eligible employer elects (at such time and in such manner as the Secretary may prescribe) to not take into account any amount of qualified fixed expensees for purposes of determining the credit under this section, such amount of qualified fixed expenses shall not be so taken into account.(2)

Coordination with paycheck protection program

The Secretary, in consultation with the Administrator of the Small Business Administration, shall issue guidance providing that covered mortgage obligations, covered rent obligations, and covered utility payments paid or incurred during the covered period shall not fail to be taken into account as qualified fixed expenses for purposes of determining the credit under this section by reason of an election under paragraph (1) to the extent that a covered loan of the eligible employer is not forgiven by reason of a decision under section 1106(g). Terms used in the preceding sentence which are also used in section 1106 shall have the same meaning as when used in such section.(h)

Transfers to certain trust funds

There are hereby appropriated to the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund established under section 201 of the Social Security Act (42 U.S.C. 401) and the Social Security Equivalent Benefit Account established under section 15A(a) of the Railroad Retirement Act of 1974 (45 U.S.C. 231n–1(a)) amounts equal to the reduction in revenues to the Treasury by reason of this section (without regard to this subsection). Amounts appropriated by the preceding sentence shall be transferred from the general fund at such times and in such manner as to replicate to the extent possible the transfers which would have occurred to such Trust Fund or Account had this section not been enacted.(i)

Treatment of deposits

The Secretary shall waive any penalty under section 6656 of such Code for any failure to make a deposit of applicable employment taxes if the Secretary determines that such failure was due to the anticipation of the credit allowed under this section.(j)

Third-Party payors

Any credit allowed under this section shall be treated as a credit described in section 3511(d)(2) of such Code.(k)

Regulations and guidance

The Secretary shall issue such forms, instructions, regulations, and guidance as are necessary—(1)to allow the advance payment of the credit under subsection (a), subject to the limitations provided in this section, based on such information as the Secretary shall require;(2)regulations or other guidance to provide for the reconciliation of such advance payment with the amount of the credit at the time of filing the return of tax for the applicable quarter or taxable year;(3)with respect to the application of the credit under subsection (a) to third-party payors (including professional employer organizations, certified professional employer organizations, or agents under section 3504 of the Internal Revenue Code of 1986), including regulations or guidance allowing such payors to submit documentation necessary to substantiate the eligible employer status of employers that use such payors;(4)for application of subsection (b)(1)(A) and subparagraphs (A)(ii)(II) and (B) of subsection (c)(2) in the case of any employer which was not carrying on a trade or business for all or part of the same calendar quarter in the prior year; and(5)for recapturing the benefit of credits determined under this section in cases where there is a subsequent adjustment to the credit determined under subsection (a).(l)

Application of section

This section shall apply only to qualified fixed expenses paid or accrued after March 12, 2020, and before January 1, 2022.(m)

Amendment to paycheck protection program to coordination with credit for qualified fixed expenses

Section 1106 of the CARES Act is amended by adding at the end the following new subsection:

(l)

Coordination with payroll tax credit for qualified fixed expenses

For purposes of this section, any payment of interest on any covered mortgage obligation, any payment on any covered rent obligation, and any covered utility payment shall not include any qualified fixed expenses which are taken into account in determining the credit allowed under section 2 of the Keeping the Lights On Act of 2021.