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IRS clarifies ERC safe harbor for PPP forgiveness

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Tax Hot Topics newsletter The IRS recently issued Rev. Proc. 2021-33 to provide a safe harbor that employers can elect to exclude Paycheck Protection Program (PPP) loan forgiveness from the definition of gross receipts solely for the purpose of determining whether an employer has experienced a significant decline in gross receipts---one of the conditions for an employer to become eligible for the employee retention credit (ERC).

The safe harbor is available if two conditions are satisfied:

  1. The employer excludes the amount of the PPP loan forgiveness from its gross receipts for each calendar quarter in which gross receipts for that calendar quarter are relevant to determining eligibility to claim the ERC
  2. The employer elects to apply the safe harbor to all employers treated as a single employer under the ERC aggregation rules

The revenue procedure describes how an employer can elect to use the safe harbor for a particular calendar quarter and includes similar safe harbors for grants under the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act to eligible live venue, performing arts, and museum operators and promoters; and restaurant revitalization grants under the American Rescue Plan Act of 2021 to qualifying restaurants and food vendors.

Contact:
Jeff Martin
Partner
Washington National Tax Office
T +1 202 521 1526

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