An Aggregated Large Employer refers to a group of affiliated entities that are under common control.For example, a parent and subsidiary, or common ownership of multiple companies. This is important for the Employee Retention Credit (ERC) because company size matters. In order to claim the credits in 2020, companies need to have under 100 full-time employees. For 2021, employers with up to 500 full-time employees qualify. The number of part-time employees does not count towards this total. However, when groupings of employers are involved, clarification is needed, so we’ve prepared this guide to help our customers determine whether they may be able to qualify for the ERC.
Which related employers are aggregated employers for purposes of the Employee Retention Credit?
Under the IRS section 52 rules, corporate taxpayers may be required to aggregate as a parent-subsidiary controlled group, a brother-sister controlled group, or a combined group of corporations. Section 52(a) of the Code describes a parent-subsidiary controlled group of corporations, generally, as one or more chains of corporations where the common parent owner/corporation owns more than 50 percent. Under this rule, entities are considered a single employer if they are under common control applying rules similar to the parent-subsidiary or brother/sister controlled group rules or the rules for a combined group of corporations.
What is the impact of the aggregation rules that treat related entities as a single employer?
All entities that are members of a controlled group of corporations or a group of entities under common control
under section 52(a) or (b) of the Internal Revenue Code (the “Code”) rules are considered a single employer for
purposes of the application of the Employee Retention Credit rules. As a result, these employers must be aggregated for purposes of the following rules applicable to the Employee Retention Credit:
- Determining whether the employer has a trade or business operation that was fully or partially suspended
due to orders related to COVID-19 from an appropriate governmental authority.
- Determining whether the employer has a significant decline in gross receipts.
- Determining whether the employer has more than 100 full-time employees.
As you can see, the rules get complicated when it comes to determining the sizes of employers that can qualify for Employee Retention Credits. Our team of payroll and tax professionals has decades of experience with these types of issues, and we can help you determine if your business can qualify. Reach out to us for assistance with your ERC claim!