Nonprofit Resources

The Fiscal Responsibility Act and the Employee Retention Credit

On June 3, 2023, President Biden signed the Fiscal Responsibility Act of 2023 (FRA) into law. While the main purpose of the law was to suspend the federal debt limit through January 1, 2025, the FRA also includes various elements to reduce the projected deficit by $1.5 trillion in the future. One of these elements involves “clawing back” (rescinding) unobligated funds related to COVID-19 relief. These relief funds were established through the Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act) as well as other congressional acts in 2020, 2021, and 2022.

Because the Employee Retention Credit (ERC) was created under the CARES Act to provide a tax-credit incentive for employers to maintain their employee levels during the uncertainty of the COVID-19 pandemic, we have received questions about whether ERC funds are subject to the claw-back provisions of the FRA or otherwise affected by the new law.

Upon examination of the various provisions of the FRA, it does not appear that the ERC has been affected by this legislation. There are no provisions in the FRA that directly reference the ERC or its related sections in prior legislation. Further, there are no apparent indirect references to the ERC.

As before, the ERC can be claimed for qualified wages paid by eligible employers during the period of March 13, 2020, through September 30, 2021. Employers must use Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund, to claim the credit by April 15, 2024, for 2020 qualified wages and April 15, 2025, for 2021 qualified wages.

You can learn more about the ERC, including what qualified wages are, how to claim the credit, and more, with our answers to frequently asked ERC questions.

If you have questions regarding eligibility for the ERC or other tax matters or would like to discuss how we could assist you in this area, please contact us.

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