The Treasury issued new guidance on May 5, 2020, regarding an employer’s ability to qualify as for the Employee Retention Credit (ERC) in the event that an employer/borrower of a PPP loan elects to return the borrowed funds prior to May 14, 2020, extended deadline. The new guidance was issued as FAQ #80 of the IRS Employee Retention Credit FAQs resource.
FAQ #80 clarifies that for purposes of the ERC, an employer that applied for a PPP loan, received payment, and repays the loan by the safe harbor deadline will be treated as though the employer had not received a covered loan. Therefore, the employer will be eligible for the credit if the employer is otherwise an Eligible Employer.
As explained in a prior post, employers who were able to avail themselves of a PPP loan were not able to take advantage of the Employee Retention Credit as well. The new FAQ simply confirms that applying employers who did receive a PPP loan, but have elected to return it, can now claim the Employee Retention Credit offered by the CARES Act.