Infrastructure Act and Employee Retention Credit

The Infrastructure Act terminated the Employee Retention Credit retroactive to October 1 instead of at the 2021 year-end. The CARES Act permitted firms to retain the payroll taxes withheld from their employees as an advance payment of the tax credit. The Infrastructure Act provided no penalty relief for those who monetized their payroll taxes and now must pay back the payroll taxes, incur penalties and interest because the credit no longer applies to offset the payroll taxes. The lack of any transitional period to pay back any of these payroll taxes may cause financial strain for distressed companies and ultimately lead to their permanent closure.