ERC Credits for Hotels and Resorts

The Coronavirus pandemic was hard on many companies and businesses, but one of the hardest hit industries is the hospitality industry and in particular hotels and resorts. Shortly after the lockdown began in March 2020, hotels were forced to either close down completely or refocus their businesses to adapt to a constantly changing travel landscape. Due to government shutdowns, supply chains have been disrupted, business travel has been drastically reduced, and hotels have been required to shut down parts of their operations, even beyond the initial lockdown period. The good news is, all of these hardships can now qualify hotels, motels and resorts for Employee Retention Credits (ERC).

What is the state of the industry?

Many hotel businesses were able to reopen in the Summer of 2020, though restrictions on capacity and precautions needed for safe operations often inhibited a return to the levels of profitability enjoyed before the pandemic. Difficulties in keeping occupancy steady during the waves of variants that have continued unabated, making it hard for hotel owners to return to profitability. Many markets have seen growth during 2022, though supply chain and lingering shutdown-related issues are still preventing some properties from fully returning to pre-pandemic levels.

What is the ERC?

Launched in March 2020, the ERC (also called ERTC) is a tax relief opportunity passed by Congress as part of the CARES Act that was designed to keep employees working and employers able to retain their staff on the payroll. Since its creation, it’s awarded millions to qualified businesses. Even though the financial forecast is looking more optimistic in 2022, many businesses still qualify to cover costs from 2021 and 2020.

What are the benefits?

During 2020 and 2021, up to $26,000 per W-2 employee is available to assist businesses, so the ERC represents a sizeable opportunity for relief in the form of tax credits. Better yet, the ERC is available even if the business has received Paycheck Protection Program (PPP) loans or Shuttered Venue Operator Grants. Hotels can receive ERC tax credits for both full-time and part-time employees, making it a very lucrative tax credit.

Changes Since Launching

In 2020, many businesses that greatly reduced their staff were not eligible for the ERC credit, however, the ERC program was greatly increased for the tax year 2021 and applies to the first three quarters of 2021. The credit maximum has been revised from $5,000 per employee in 2020 to $7,000 per employee per quarter in 2021. The IRS also expanded the “small business” distinction from under 100 to under 500 employees, among other changes.

Eligibility

The ERC program is designed to benefit organizations that were forced to either fully or partially shut down as a result of government orders during the pandemic. Partial shutdowns include impacts such as supply chain disruptions, travel restrictions, reduction in services offered, reduction in capacity, and more. A decline in gross receipts of 50% in 2020 or 20% in 2021), when compared to 2019, is another way to qualify.

How to Apply and Qualify

To apply, be sure to gather the appropriate data to prove eligibility. This includes a list of full-time employees for 2019 to use for comparison, plus gross receipts from 2019, 2020, and 2021, if you’re using revenue reduction to qualify. You’ll also need to gather quarterly 941 tax returns, PPP loan documents, and employee wage data from 2019, 2020 and 2021. Bear in mind that although they can be received concurrently, an employer cannot use the same specific wages used for a PPP loan forgiveness program for the ERC, and vice versa.

In Conclusion

All in all, the ERC credit is a great way for hotels and resorts to receive compensation for some of the financial challenges they have experienced over the past few years. Contact one of our ERC Specialists to help assist your application and review process today. Things are looking up for hotels and resorts, and we’re excited to help the hospitality industry get back on its feet faster.

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Although ordinary life was disrupted and many business operations were fully or partially suspended by COVID-19 lockdown orders, there were plenty of employers whose organizations were already structured in a way that allowed work to continue as usual – and there were many companies who quickly pivoted to telework and maintained normal operations. Maybe your…

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