Article
How the employee retention credit (ERC) can benefit aerospace companies
May 25, 2022 · Authored by Tan Le, Kurt Lippmann, Peter Henderson
The Employee Retention Credit (ERC), also known as ERC credit or ERC tax credit, has proven to be one of the most lucrative incentives currently available to aerospace companies, though many companies are unaware of the potential cash benefit they could receive.
Given the substantial downturn in air travel during the COVID-19 pandemic, many aerospace companies could be eligible for the credit. Learn the eligibility requirements and benefits of the credit as detailed below.
How the ERC credit can help recovery for the aerospace industry
The ERC presents an opportunity for many companies to accelerate recovery.
Cash generated from the credit can be used to expand business operations, refine processes, and invest in the future adaptability of the business. The ERC can also help aerospace companies position themselves to weather future challenges during recovery.
What are the benefits of the ERC?
The ERC is well timed to assist with economic recovery, given that the tax credit increased from a maximum of $5,000 per employee per year for 2020 to a maximum of $7,000 per employee per qualified quarter in 2021.
The ERC can provide companies that are eligible for the federal tax credit with additional cash flow to broaden strategic horizons, including up to $26,000 per employee. Credits of over $1 million per eligible quarter are even common for companies with as few as 150 employees.
Credits are also fully refundable, even if the company has tax losses, and can be taken in addition to the Paycheck Protection Program (PPP) and other incentives.
Aerospace business ERC credit eligibility requirements
To qualify for the ERC, aerospace and defense companies must have experienced a significant decrease in revenue in a quarter within 2020 or 2021 compared with the same quarter in 2019. Many aerospace companies experienced this revenue decrease, due to the pandemic-induced pause in air travel.
How can you tell if your aerospace company is eligible for the ERC?
Related sections
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.