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Employee Retention Credit Considerations for Senior Living Providers

The ERC is still available for qualifying organizations within the healthcare industry. Read on to see how to qualify for and claim the credit.
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The Employee Retention Credit (ERC) made available by the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020 has enabled qualifying organizations within the healthcare industry, including senior living providers and CCRCs, to access funds for costs not reimbursed through other pandemic assistance such as Paycheck Protection Program loans. The ERC, available for 2020 and most of 2021, is still available for organizations that meet the eligibility criteria and can result in a benefit of up to $26,000 per employee.

Organizations that have not yet evaluated ERC applicability, and even some of those that have but originally thought it was not applicable to them, may want to consider the program. Guidance issued by the IRS and other relevant agencies has provided additional clarity on how the ERC interplays with other funding, as well as a deeper understanding of relevant government orders and how to assess and calculate qualifying wages.

The ERC is a refundable payroll tax credit that is available to qualifying for-profit and tax-exempt organizations.

There are two hurdles an organization must meet to qualify and claim the credit: It must be an eligible employer and have qualifying wages. An organization qualifies as an eligible employer by either meeting the gross receipts decline qualification or by experiencing a full or partial suspension of operations due to a COVID-19-related government order limiting commerce, travel, or group meetings. While many healthcare organizations may not have experienced a gross receipts decline of a magnitude that qualifies them as an eligible employer, professionals at FORVIS have seen relevant COVID-19 government orders that have significantly impacted many across the industry, including long-term care facilities.

If a senior living provider/long-term care facility does not meet the gross receipts decline test (most do not since they received Provider Relief Funds and other funding), many could still meet the government order test to be eligible for the ERC. To be eligible for the ERC through the government order test, you need to demonstrate two things:

  1. A COVID-related government order partially suspended your business, or significantly restricted your ability to operate (does not require full closure), and
  2. That the orders negatively impacted the organization by a more than nominal amount, which the IRS defines to be at least 10% (does not have to be a 10% decline in revenue).

In our experience, in addition to any state, county, or city orders there might have been specific to long-term care, the national orders specific to long-term care facilities from CMS and the CDC that required the creation of a COVID wing that limited the facility’s capacity—not allowing third-party providers or visitors to enter, no communal dining, mandatory testing of both residents and staff when there was a COVID outbreak, etc.—were extremely limiting and led to a significant decrease in residents and available staff. If the facility is able to demonstrate a more than nominal impact, possibly through decreased bed census and significant increases in wages or agency costs, this would appear to meet the IRS’ published criteria for eligibility.

If the organization is considered a small employer (below 100 full-time employees in 2019 for the 2020 credit; below 500 full-time employees in 2019 for the 2021 credit), then the credit can be up to $5,000 per employee in 2020, or up to $7,000 per employee per quarter in 2021 through the third quarter. Therefore, an organization can receive up to $26,000 total per employee if it is eligible for both years. With the continued financial struggles of many long-term care facilities and most other government funding sources ending at this point, there is heightened concern about how these facilities will continue their operations going forward. The ERC has been a lifeline for many facilities and helped them provide continued care to their residents.

As organizations consider ERC eligibility, they should be aware of recent warnings issued by the IRS related to ERC claims. There is increased scrutiny of these credits as a result of ERC promoters assisting taxpayers with inaccurate or unsubstantiated claims, typically charging a contingency fee for their services. If a taxpayer believes it is eligible for the ERC, it is important to select a trusted advisor who can help provide appropriate documentation of eligibility and an accurate credit calculation. The IRS can impose significant penalties related to tax-filing inaccuracies or fraud. Taxpayers also may consider revisiting ERC positions if they are concerned about ongoing calculation efforts or previously filed claims.

While qualification for the ERC is based on the specific facts and circumstances of each employer, there may be ERC opportunities for many types of healthcare organizations. Our team has experience assisting all types of organizations with related analyses, and we stand ready to discuss your organization’s specific fact patterns. It is important to plan ahead and evaluate eligibility now, as adequate time will be needed to evaluate and document eligibility, calculate the credit, and file the amended Forms 941 before the refund statute of limitations expires beginning April 15, 2024 for the 2020 credit and April 15, 2025 for the 2021 credit.

If you have any questions or need assistance, please reach out to a professional at FORVIS or submit the Contact Us form below.

Please download the qualification exhibit reflecting the most recent legislative impacts regarding ERC.

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