Key Tax Provisions of Infrastructure Bill Include Earned Retention Credit Termination

There are relatively few tax provisions in the Infrastructure Investment and Jobs Act (H.R. 3684) that passed the House of Representatives late last week and is headed to President Joseph Biden’s desk to be signed into law.  More extensive changes may be coming in the fiscal year 2022 budget reconciliation bill that remains under consideration by Congress. Those would include relief from the $10,000 state and local tax deduction cap, corporate and international tax changes, and limits on the interest expense deduction.

Employee retention credit

The infrastructure legislation ends the employee retention credit (ERC) early, making wages paid after September 30, 2021, ineligible for the credit (except for wages paid by an eligible recovery startup business).

The ERC was available to eligible employers for wages paid during the third and fourth quarters of 2021; however,  H.R. 3684 repeals the fourth-quarter extension.

However, wages paid by an eligible recovery startup business is eligible for the credit.

A recovery startup business is defined as a business that:

  • began carrying on a trade or business after February 20, 2020, and
  • whose average gross receipts as calculated under 448(c)(3) does not exceed $1,000,000.

A recovery startup business’s total ERC for eligible employees is limited to $50,000 per quarter.

Cryptoasset reporting

Section 80603 of the legislation will impose new cryptoasset information reporting requirements on brokers. The definition of “broker” is expanded to include anyone who for consideration effectuates “transfers of digital assets on behalf of another person.” For these purposes, “digital asset” is defined as “any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology.

The legislation will require brokers to provide information returns reporting any transfers of digital assets to accounts that are not maintained by a broker.

Other tax provisions

The legislation includes other tax provisions, including extension of various highway-related taxes, and extension and modification of certain superfund excise taxes. It also would allow private activity bonds for qualified broadband projects and carbon dioxide capture facilities.

The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.