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IRS Employee Retention Credit (ERC) Guidance Notice 2021-49 Garners Congressional Criticism


Congressman Jack Bergman, R-MI, in an August 9 letter to IRS Commissioner Chuck Rettig, expressed concerns with recent IRS guidance on the Employee Retention Credit under Section 3134 of the Internal Revenue Code, as added by section 9651 of the American Rescue Plan Act (ARP), (P.L. 117-2). Specifically, Bergman objected to language in IRS Notice 2021-49 that prevents wages paid to a majority owner of a corporation from qualifying under the ERC solely if the owner has a direct family member.

ERC Guidance

The IRS on August 4 released Notice 2021-49, which provides guidance on the ERC applicable to qualified wages paid after June 30, 2021, and before January 1, 2022. The Notice will appear in IRB 2021-34, dated Aug. 23, 2021.

“The distinction made in your guidance is entirely illogical, goes against the intent of Congress, and arbitrarily punishes Americans with families,” Bergman wrote to Rettig. “I therefore request further explanation as to the statutory rationale for this decision and urge you to take action as needed to correct this absurd bureaucratic move.”

Additionally, the IRS on August 10 released Rev. Proc. 2021-33, which provides a safe harbor that permits a taxpayer to exclude certain items from “gross receipts” under sections 448(c) and 6033, as applicable, solely for purposes of determining eligibility to claim the ERC.

Looking Ahead

Notably, the IRS’s interpretation of the law in Notice 2021-49 is not in direct contradiction of legislative text as enacted. If the IRS's position is in fact contrary to congressional intent, leadership of the House Ways and Means and Senate Finance Committees will likely need to alert Rettig to this issue as well or correct the issue legislatively. 

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