If a government order suspends nonessential business operations, but not essential ones, would that be a full or partial suspension?

An essential business isn’t considered to have had any suspension of operations if all employer operations are allowed to continue. However, more than a nominal portion of operations being suspended would be considered a partial suspension. For example, an essential business may have a partial suspension if a government order caused the following: Required a business to close for a period during normal working hours Required a credit union to close its lobby Prevented personal bankers who had frequently met with members in-person from doing so Social distancing limitations on member recruitment meetings

How do telework operations affect suspension status?

Unless the closure of the workplace causes the employer to suspend business operations for certain purposes but not others, telework wouldn’t count as part of a suspension. The credit union should look at the entirety of facts and circumstances to determine whether telework allowed operations to continue normally.

What factors are considered for qualifying as continued operations?

The notice listed the following factors while also stating that additional factors could apply: Employer telework capabilities The employer has adequate IT and other support to continue operations from another location. Employee work portability How much work can be performed remotely? Need for employee’s physical presence in the workspace How does the physical workspace factor into operations? This could range from critical and necessary, beneficial but not necessary, to mere convenience. Transitioning to telework operations An adjustment period would be expected if an employer’s operations didn’t previously allow for telework, but that doesn’t necessarily cause a partial suspension. A significant delay beyond two weeks while transitioning to telework could be considered a partial suspension. Modifications that might not qualify Modifying business operations per government order doesn’t indicate a partial suspension in and of itself unless those modifications had more than a nominal effect on the employer’s business operations.

When would limited business operations be considered partial suspension?

If a governmental order requires an employer to close its workplace, an employer’s operations would be considered partially suspended if more than a nominal degree of ceased business operations couldn’t be performed in a comparable capacity otherwise.

What determines how a government ordered modification affects business operations?

The modifications considered here are those required by a governmental order as a condition to reopen a physical space for business or to serve the public. These modifications include:

Can reduced hours of operation qualify as a partial suspension?

Yes. An employer that reduces its operating hours due to a governmental order is considered to have partially suspended its operations.

Can operational suspension in some, but not all, business locations qualify as partial suspension?

Yes. These employers are considered to have a partial suspension.

Article

How credit unions qualify for the employee retention credit (ERC credit)

Jan. 23, 2023 · Authored by Craig Lammlin, Wendy Campos, Steve Talbot, Emina Cresswell

The employee retention credit (ERC, also known as the ERC credit) has proven to be a lucrative benefit for many qualified businesses. State and federal credit unions may be eligible, depending on whether they qualify based on a substantial decline in gross receipts, or have experienced a partial suspension of operations.

Note that this guidance comes well after the enactment of the ERC credit and is based on a continuously evolving understanding of the credit, the nuances of the credit union industry, and an understanding of IRS ERC credit claim substantiation and documentation requirements.

What is the ERC credit?

The ERC credit entitles eligible employers to a refundable payroll tax credit for the periods March 13–Dec. 31, 2020, and Jan. 1–Sept. 30, 2021.

State credit unions may be eligible for the ERC credit for the period March 13, 2020, through Sept. 30, 2021, whereas federal credit unions may be eligible for the period Jan. 1, 2021, through Sept. 30, 2021.

The credit can be claimed on an employer’s Form 941. For employers that didn’t claim the ERC credit on their original Form 941, it can be claimed on an amended form, Form 941-X.

The statute of limitations for filing Form 941-X to claim a refund is three years from the date the original return was filed or two years from the date the taxes were paid.

Payroll tax returns for a period ending with or within a calendar year filed before April 15 of the following year are treated as filed on April 15 of that following calendar year.

For a credit union to qualify, they must have experienced one of the following:

Reduction of revenue of at least 50% for a single quarter in 2020 or at least 20% reduction for a single quarter in 2021, as compared with the equivalent quarter in 2019, or
Full or partial suspension of operations due to governmental order due to COVID-19 limiting commerce, travel, and group meetings.

ERC credit employee requirements

The credit is primarily meant to help small and midsized businesses. Eligibility is based on the average number of full-time employees in the 2019 calendar year. For 2020 quarters, businesses with 100 or fewer full-time employees in 2019 can apply the credit to qualified wages including certain health plan expenses for all employees.

Craig Lammlin

Managing Director

Wendy Campos

Principal

Related sections

Financial Services

The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

How credit unions qualify for the employee retention credit (ERC credit)

What is the ERC credit?

ERC credit employee requirements

Craig Lammlin

Wendy Campos

Related sections

Amount of credit

ERC credit for credit unions

Partial suspension FAQs

If a government order suspends nonessential business operations, but not essential ones, would that be a full or partial suspension?

How do telework operations affect suspension status?

What factors are considered for qualifying as continued operations?

Employer telework capabilities

Employee work portability

Need for employee’s physical presence in the workspace

Transitioning to telework operations

Modifications that might not qualify

When would limited business operations be considered partial suspension?

What determines how a government ordered modification affects business operations?

Can reduced hours of operation qualify as a partial suspension?

Can operational suspension in some, but not all, business locations qualify as partial suspension?

How credit unions can start the ERC credit application process

Have questions? Baker Tilly can help.