For purposes of the ERC, an eligible employer must be able to reflect that EITHER the business had operations that were fully or partially suspended OR experienced a significant decline in gross receipts. To be an eligible employer for the ERC they must only meet one of these tests. It is an “OR” test.

Not so fast. There are a variety of ways where a business is considered subject to a partial shutdown. Two of the most common examples often missed are instances where operational hours are limited or where suppliers of an essential business are suspended due to governmental orders.

Governmental orders include an order from a local official imposing a curfew on residents that impacts the operating hours of a trade or business for a specified period. 

An employer that averaged greater than 500 full-time employees in 2019 can only evaluate wages paid to employees for not providing services. Sometimes this statement discourages large employers, but this requires a closer look. Remember that qualified wages include the employer’s contribution of qualified health plan expenses. Therefore, qualified health plan expenses paid by the employer for furloughed employees would be included as a qualified wage for large employers. In addition, the wages paid to employees who weren’t working full time may also be considered. For example, assume you continue to pay someone their full salary even though they are only working 25 hours a week. The compensation for the “non-working” 15 hours a week could be considered a qualified wage for a larger employer. Documentation surrounding these conclusions will be key.

Maybe. The rules governing employee headcount for PPP loans falls under the Small Business Administration (“SBA”) guidelines. Under SBA guidelines, an employer must calculate the average number of people employed for each pay period over the business’s latest 12 calendar months. Any person on the payroll must be included as one employee regardless of hours worked or temporary status. Therefore, regardless if an employee worked 5 hours or 40 hours, they would be counted as 1 employee for PPP.