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Hern co-sponsors bill to reinstate Employee Retention Tax Credit, help small businesses

Representative Kevin Hern (OK-01) joined a bipartisan coalition of members from the House Committee on Ways and Means to introduce the Employee Retention Tax Credit (ERTC) Reinstatement Act, a bill to reinstate the ERTC meant to help small businesses rehire and retain employees during the COVID-19 pandemic. The ERTC was overwhelmingly supported in the bipartisan Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in March 2020. 

Representative Carol Miller (R-WV-03) is the lead sponsor and Representatives Stephanie Murphy (D-FL-07) and Terri Sewell (D-AL-07) joined Rep. Hern as original co-sponsors. 

“Eliminating the Employee Retention Tax Credit was the wrong decision and hurts our small businesses who are still recovering from the economic fallout of the pandemic,” said Rep. Hern. “We must provide certainty and predictability to American small business owners. I am proud to join my colleagues in support of this legislation and I hope to earn strong bipartisan support in the House.

Background Information

Originally, to be eligible for the ERTC, business owners had to demonstrate at least a 20% decline in gross receipts in either a given quarter compared to the same quarter in 2019 or the immediately preceding quarter. Alternatively, the business owner may have been eligible if the business is subject to a full or partial suspension of business operations due to a government order.

Specifically, for this year’s third and fourth quarters, business owners can qualify for the ERTC as a “recovery startup business” or qualify as a “severely financially distressed employer.” To claim the ERTC as a “severely financially distressed employer,” the business must have suffered at least a 90% decline in gross receipts in a specific quarter compared to the same quarter in 2019.

The ERTC was scheduled to expire at the end of 2021, but the recently enacted Infrastructure Investment and Jobs Act disallowed this credit for the fourth quarter of 2021. Many small businesses have continued to take the tax credit into the fourth quarter, and now face a retroactive tax increase and a complex, frustrating process in reconciling the credit that they will now have to forfeit.