AICPA Seeks Guidance on Employee Retention Credit Provisions of CARES Act

In April of 2020, the American Institute of CPAs submitted a letter that identified areas in need of guidance related to the employee retention credit (ERC) provisions of the Coronavirus Aid, Relief and Economic Security (CARES) Act. The AICPA is now seeking additional guidance and clarity on these provisions in a new letter to the Department of the Treasury and the Internal Revenue Service.

In its most recent comments, the AICPA requests Treasury and the IRS do the following:

1. Provide authoritative guidance that addresses the mutually exclusive nature of Paycheck Protection Program (PPP) loans and the ERC in mergers and acquisitions.
2. Provide guidance stating that intermediate entities (e.g., entities in the middle of a supply chain) are considered partially suspended due to a shutdown in situations where their business customers are closed due to a governmental order.
3. Provide guidance on how to apply the provisions of the CARES Act, Section 2301(c)(3)(A)(i), which states that the credit is only available for wages with respect to employees who are not providing services in a calendar quarter in which the eligible employer experiences a significant decline in gross receipts or has a full or partial suspension of operations due to a government order.
4. Provide guidance stating that prepaid income and payments from the Higher Education Emergency Relief Fund are excluded from the definition of gross receipts for tax-exempt employers.
5. Provide guidance stating whether the aggregation rules apply to tax-exempt entities and, if so, how they apply.
6. Provide a correction to FAQ #25 related to the aggregation rules to indicate that corporations must be aggregated with entities other than corporations.