President Biden signs Infrastructure Bill

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Rödl & Partner Tax Matters Volume  2021 -8, published November 23, 2021 

On November 15, 2021, President Biden signed into law the Infrastructure Investment and Jobs Act (“Infrastructure Bill”).  While most provisions of the law relate to funding for improvements for transportation and various utilities, the law included some tax changes impacting U.S. businesses and individuals.

 
Early Termination of Employee Retention Credit

 
The CARES Act provided for a lucrative tax credit to employers retaining employees through a downturn of business resulting from the pandemic.  The Employee Retention Credit (“ERC”) allows for businesses with a 20% reduction of sales in 2021 compared to 2019 (see Tax Matters 2021-2 for more details on eligibility and claiming the ERC) to receive a refundable tax credit.  The ERC was set to expire December 31, 2021 under the CARES Act.  The Infrastructure Bill advances the expiration date to September 30, 2021, effectively reducing the maximum credit from $28,000 to $21,000 for 2021.
 
One exception to the early termination of ERC exists for “recovery startup” businesses.  These are businesses starting after February 15, 2020 with less than $1 million in gross receipts (including gross receipts in “attributable” businesses with common ownership).  For these businesses, the credit is still available through the end of 2021. 
 
Any employers that had retained payroll taxes based on a calculation of ERC through December 31st may need to pay back the taxes previously retained in their next quarterly payroll deposit.
 
Note that taxpayers claiming the ERC will have an adjustment to 2021 taxable income.  Any wages subject to the credit must be subtracted from the taxpayer’s salaries and wages deduction for the year, effectively increasing taxable income by the amount of the credit. 
 

New Reporting Requirements for Cryptocurrencies and Other Digital Assets

 
For transactions occurring during 2023, certain “digital asset” transactions must be reported by certain “brokers”.  For this purpose, a broker is defined as any person who “is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person”. A digital asset is defined as “any digital representation of value which is recorded on a cryptographically secured digital ledger or any similar technology”.  Authority was granted to the Treasury Secretary to provide guidance in the types of transactions and technologies subject to these reporting rules, and we will be monitoring Treasury releases for additional details.
 

Disaster Relief

 
The new law also provides clarification and modification to the 60-day automatic extension of certain deadlines for taxpayers affected by a federally declared disaster.  Previous IRS guidance explained how the 60-day period would be determined.  Under the Infrastructure Bill, the 60-day period ends following the later of the earliest incident date or the date FEMA announces a federal disaster declaration.  This new definition could result in a period longer than 60 days.
  
If you have any questions about how any provisions of the Infrastructure Bill apply to your business, please contact your Rödl and Partner representative.