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May 7, 2024

Does Your Company Qualify for an ERC? The Answer is Likely ‘Yes’

Employee Retention Credit

Integrators are being rewarded with an Employee Retention Credit (ERC) for their efforts to keep employees on payroll during the pandemic—and you could be one of them.

When I first explained to Chuck Wilson, NSCA executive director, the Employee Retention Credit (ERC), he was shocked by how many system installers and low-voltage integrators qualify to claim it. He let us know about the industry confusion and misinformation surrounding ERCs, so we’ve been trying to educate members on how they qualify ever since.

For instance, we recently helped a life safety integrator claim $1.6 million—and they didn’t think they would even qualify.

We want to make sure that no NSCA member leaves money on the table. If you’ve looked at the credit before, take another look: Recent expansions to the credit have opened qualification to more businesses and also made it significantly more lucrative. The ERC is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees.

How NSCA Members Qualify

Let’s start by talking about how you qualify. One of the biggest myths about the ERC is that, in order to qualify, a business had to experience a drop in revenue during the pandemic.

That simply isn’t true. If a business had to change or adapt operations due to the pandemic (and almost all businesses did), then that business can qualify. These criteria may sound broad, but they were intended to be. In fact, the IRS expected 80% of businesses to claim the ERC, according to Eric Hylton, former IRS commissioner of the Small Business Division.

Congress’ intent in expanding the credit was to bring more dollars into the economy by infusing funds into small and medium-sized businesses that form the backbone of our country. In other words: They want you to take the money whether your business is doing well or not.

For NSCA members, qualifying changes can include:

  • Reducing hours of operations
  • Full or partial facility shutdowns
  • Not being able to access client sites
  • The inability to work with vendors
  • Supply chain disruptions

The list above is not exhaustive, but many NSCA members we’ve spoken with have experienced at least one of the above—supply chain issues being very common. Even if you didn’t have a drop in revenue or face a lockdown, you can still qualify if supplier and vendor disruptions had an impact on your operations.

Value of the Credit

What will you receive in return for the changes you had to make during the pandemic?

Let’s look at an example of a small AV integrator with 24 employees that faced changes due to social distancing. They were unable to receive materials in a timely manner due to supplier delays and had trouble visiting client sites due to lockdown restrictions. With our help, this integrator was able to claim $149,000 in credits.

A slightly larger security and life safety integrator faced very similar issues, and that company was able to claim $436,000 in credits. Because they were relying on erroneous and outdated misinformation about ERCs, none of these companies thought they qualified—just like the integrator we mentioned at the beginning of this blog.

The PPP Myth

One of the big misconceptions Wilson asked us to dispel for NSCA members surrounds the Paycheck Protection Program (PPP).

Many NSCA members assume that, if they claimed a PPP loan, then they can’t claim the ERC. When the credit was first introduced, that was true—but it’s no longer the case. At the end of 2020, the Consolidated Appropriations Act of 2021 was signed into law, ensuring that businesses can claim both a PPP loan and the ERC.

If you think you qualify for an ERC, or if you previously disqualified yourself, it’s absolutely worth it to reach out to a specialist tax consultant like NSCA Business Accelerator alliantgroup to find out if you qualify and substantiate your claim.

Learn more here.

Patrick Reinschmidt is an education and awareness associate at alliantgroup.

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