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October 2017

President Signs Disaster Tax Relief Bill

 

In the last three months, US residents were devastated and are now faced with recovering from the impact of Hurricanes Harvey, Irma, and Maria, with Harvey being one of the most powerful in recent history.

As we all know after such devastation, it is vital to a community to get back to operational as soon as possible and this includes helping businesses get their employees back to work and providing much needed services.  Disaster relief in the aftermath of crippling weather events is as important to businesses as it is to the residents of affected communities.

On September 29, 2017, President Trump signed HR 3823, the Disaster Tax Relief and Airport and Airways Funding Act of 2017, and that bill became law on that same date.  Section 503 of the bill, entitled “Disaster-Related Employment Relief,” addresses the retention tax credit, which applies to wages paid by an eligible employer to an eligible employee during the time when the employee’s workplace was inoperable as a result of a declared disaster.  The retention credit applies to impacted disaster zones resulting from Hurricanes Harvey, Irma, and Maria and also has specific requirements to meet eligibility.

Now to the good stuff!  How does a business qualify? Which employees are eligible? Etc, etc…the fun facts are below…

To paraphrase the cryptic language of the Internal Revenue Code, the employee retention credit for any taxable year is an amount equal to 40 % of the qualified wages for each eligible employee, of the affected employer, for that taxable year, not to exceed $6000 in qualified wages for each eligible employee.

To clarify…an “eligible employer” means any employer,

1) which conducted an active trade or business on August 23, 2017, in the Hurricane Harvey disaster zone, on September 4, 2017, in the Hurricane Irma disaster zone, and on September 16, 2017, in the Hurricane Maria disaster zone and

2) if the business was inoperable on any date between August 23, 2017, and before January 1, 2018, as a result of damage sustained by Hurricane Harvey; dates between September 4, 2017, and before January 1, 2018, as a result of damage sustained by Hurricane Irma; and dates between September 16, 2017, and January 1, 2018, as a result of damage sustained by Hurricane Maria.

The retention credit also requires that the employee is deemed an “eligible employee”…which is defined as an employee whose principal place of employment on August 23, 2017, September 4, 2017, and September 16, 2017, coincides with the designated hurricane disaster zones for Hurricanes Harvey, Irma, and Maria.

In addition, the term “qualified wages” means wages paid or incurred by an eligible employer, with respect to any eligible employee, on any of the specified dates for each of the hurricane disaster zones beginning on the date the business first became inoperable immediately before the hurricane and ending the date that the business was able to resume operations at the designated workplace.  The qualified wages include wages paid whether the employee performs no services, performs services at a different location, or performs services at the principal workplace before operations have resumed.

Here’s the caveat, and there is always a caveat with new legislation.  To be considered for the credit, the employee cannot be treated as an “eligible employee” if the employer is allowed the credit under the Internal Revenue Code of 1986 for the same time period.

If you would like more information and you just LOVE reading new tax legislation you can read the bill in it’s entirety here.

We know know tax credit changes can be difficult to understand. If you would like to know more about how to claim this credit, or whether or not you qualify, feel free to give us a call at 866-844-9529, or reach out to us here.

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