As part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed by President Donald Trump March 27, the U.S. Treasury Department and the Internal Revenue Service (IRS) launched the employee retention credit program designed to encourage businesses, including many of our for-profit and nonprofit health care clients, to keep employees on their payroll amid the COVID-19 crisis.

The employee retention credit provides a fully refundable tax credit to eligible employers equal to 50% of qualified wages (including allocable qualified health plan expenses) paid to employees between March 13 and Dec. 31. The credit is determined quarterly. The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for an eligible employer for qualified wages paid to any employee is $5,000 (or 50% of $10,000).

Who Are Eligible Employers?

Eligible employers are those that "carry on a trade or business during calendar year 2020," including tax-exempt organizations, that either: fully or partially suspends operations during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious or other purposes) due to COVID-19; or experience a significant decline in gross receipts compared to the same quarter of the prior year.

The operation of a trade or business is "partially suspended" if an appropriate governmental authority imposes restrictions on the employer's operations by limiting commerce, travel, or group meetings such that the employer can still continue some, but not all of its typical operations. This allows many employers who were affected by state and local shutdown orders to qualify, including those whose operations are impacted by spacing restrictions or stay-at-home orders.