The Employee Retention Credit (ERC) got a huge boost in the latest Covid Stimulus Bill, and it now represents hundreds of thousands of dollars for many camps. Here’s how to maximize your 2020 (retroactive) and 2021 ERC.
First, there are two years to consider: 2020 (retroactive) and 2021. The rule used to be that you can’t participate in both ERC and PPP. That was just changed, and organizations are allowed to go back and request ERC for 2020, and then also request it for 2021. You still need to be careful not to “double dip” (see below), but you can now do both programs in parallel.
It’s easiest to understand this in two parts. First: eligibility; and second: payment/claim.
To be eligible, your gross revenue must be lower than it was in the same quarter in 2019. It must 50% lower for 2020 ERC, but only 20% lower for 2021 ERC. And in both cases, 2019 is the baseline.
Gross revenue includes earned revenue (e.g., tuition) and fundraising. For camps that didn’t run last year, that’s easy to demonstrate. This year most camps are running, and so “minimizing” or planning your fundraising revenue for the quarter the ERC is being claimed is important.
But wait, there’s more! Since you can’t know for sure when gross revenue will pick up in 2021 and exceed the 20% reduction requirement, ERC makes the first quarter where your revenue is too high eligible. That’s a big deal, given the payout calculation below.
Camps should stall PPP2 payment as long as possible, too—being careful not to reduce or jeopardize your eventual PPP2 payment. Andrew Gurwitz Ziv from Eden Village Camp has done an incredible job tracking PPP and ERC, and he provides excellent tools for numerically maximizing PPP2 forgiveness and ERC credit/payout simultaneously
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Instead of revenue reduction, you can also be eligible for ERC if you are forced to close, but that’s looking unlikely in the US (except perhaps Michigan…?) this summer.
Setting aside eligibility, here’s what camps can claim (payment):
- 2020 ERC: 50% of total payroll costs up to $5K/employee/year
- 2021 ERC: 70% of total payroll costs up to $7K/employee/quarter
Camps can claim this immediately by reducing their payroll taxes, or requesting a cash refund from the IRS if that’s not enough.
There are many more details, but that’s the basic idea. We will continue to track the IRS guidance and camp experiences. And your final approach should be vetted by tax attorneys.
Written by Aron Goldman. Aron is a Mentor with JCamp 180. Aron’s focus areas at JCamp 180 include camper enrollment, recruitment, and retention. He also directs our year-long Enrollment Program. Aron also has experience working as a consultant with grassroots, regional, national, and international organizations in the areas of capacity-building, strategy, and systemic change.
Who we are: JCamp 180 is a program of the Harold Grinspoon Foundation (HGF). Our goal is to significantly enhance the long-term effectiveness of nonprofit Jewish camps in North America. To meet this goal, we provide affiliated Jewish camps with consulting services, annual conferences, shared resources, professional development, and matching grant opportunities. Find more at www.jcamp180.org