Construction
Building Up Your Tax Incentives
When the COVID-19 pandemic came on site and lockdowns and other restrictions were imposed, even the best-run construction businesses took a hit financially. Many not only suffered from staffing shortages but also were unable to source basic building materials.
Some construction employers might not be aware of a tool offered by the United States government in the form of a tax credit. Referred to as the Employee Retention Credit (ERC), it’s a refundable payroll tax credit introduced through the Coronavirus Aid, Relief and Economic Security Act (CARES Act) to encourage eligible employers to keep their employees on the payroll during the pandemic.
Just how much of a tax credit can eligible construction businesses receive through the ERC? It depends on the number of employees and for what years they qualify.
For 2020, the ERC is a credit against certain payroll taxes of 50 percent of the wages paid — up to $10k per employee — from March 12 – December 31, 2020. It’s capped at $5k per employee. The ERC for 2021 is a quarterly tax credit of 70 percent of the first $10,000 in wages per employee in each quarter of 2021 from January to September 2021 (capped at $7K per employee per quarter).
Government Orders
Example: Alaska, March 15, 2020 – Alaska is requiring all out-of-state travelers per a health mandate to self-isolate for 14 days. Critical Infrastructure businesses with employees traveling to Alaska must submit a plan to the Department of Commerce, Community, and Economic development outlining how they will maintain critical infrastructure. Quarantined travelers must remain in their hotels for 14 days or until they leave Alaska. Attachment A to the Order defines critical infrastructure as twenty four categories including healthcare, construction and public works, mining, financial services, grocery stores, agriculture and fishing, gas stations, suppliers of essential supplies to other essential businesses, professional services necessary to assist compliance with legally-mandated activities, among others.
Find More Government Orders Specific to Your State on Our Insights Page
How do you know if your business is eligible for the Employee Retention Credit? Check out these FAQs to find out:
What Benefits Does the Employee Retention Credit Offer for Construction Businesses?
How Do I Know if My Business is Eligible for the ERC?
There are two main ways to be eligible for stimulus refunds:
- If your business matches the required decline in revenue within any quarter of 2020 or 2021.
- If you have W-2 employees.
What Exactly Is a Significant Decline in Gross Receipts Under the Employee Retention Credit Program?
How Long Is the ERC Available?
For all four quarters in 2020, the deadline to apply is April 15, 2024. For all quarters in 2021, the deadline is April 15, 2025.
How Do I Know Which COVID-19 Governmental Orders Were Enacted in the State Where My Construction Business is Located?
How Do I Apply for the Employee Retention Credit?
If you are unsure about how to file for the ERC or need assistance preparing and submitting your application, consider working with one of our talented tax professionals. We’ll guide you through the process to ensure you get the credit you deserve. Contact us today to learn more!
Qualifying orders (From IRS)
What kind of government orders qualify my business or organization for the ERC? (added July 28, 2023)
To qualify for ERC, you need to have been subject to a qualifying government order related to COVID-19 that caused a full or partial suspension of your trade or business operations. The government order may be at the local, state, or federal level.
Examples of governmental orders:
- An order from the city’s mayor stating that all non-essential businesses must close for a specified time period;
- A state’s emergency proclamation that residents must shelter in place for a specified period, except for essential workers;
- An order from a local official imposing a curfew on residents that impacts the operating hours of your trade or business for a specified time period;
- An order from a local health department mandating a workplace closure for cleaning and disinfecting.
Can I rely on a recommendation, bulletin or statement issued by a government authority to qualify for ERC? (added July 28, 2023)
No. To qualify for the ERC, you must have been subject to a government order that fully or partially suspended your trade or business.
Recommendations or statements encouraging you to take certain actions are not orders.
If you use a third party to calculate or claim your ERC, you should ask them to give you a copy of the government orders – not a generic narrative about an order. Read the order carefully and make sure it applied to your business or organization.
Is being subject to a government order enough to make me eligible for ERC? (added July 28, 2023)
No. You need to demonstrate that the government order was related to COVID-19 and that it resulted in your trade or business being fully or partially suspended.
What does it mean to be fully or partially suspended? (added July 28, 2023)
Whether your business or organization was fully or partially suspended depends on your specific situation. For examples, see Notice 2021-20, Part III, Section D.
Some examples of who doesn’t qualify under this eligibility factor:
- If all your employees were able to telework during the pandemic and your business continued to operate, your business wasn’t suspended.
- If your customers were affected by a stay-at-home order, but no orders applied to your business operations, you weren’t suspended.
- If you voluntarily closed your business or reduced hours of operation, you weren’t ordered to suspend.
You could still qualify for ERC based on a decline in gross receipts even if you don’t qualify under suspension of operations due to government order.
Was my business or organization fully or partially suspended if I had a supply chain issue? (added July 28, 2023)
A supply chain issue, by itself, does not qualify you for the ERC.
The IRS provided a narrow, limited exception if an employer was not fully or partially suspended but their supplier was. However, it applied only when the employer absolutely could not operate without the supplier’s product and the supplier was fully or partially suspended themselves.
In addition to having the supplier’s governmental order, you will need to show that:
- The government order caused the supplier to suspend operations,
- You couldn’t obtain the supplier’s goods or materials elsewhere (regardless of cost), and
- It caused a full or partial suspension of your business operations.
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