The Treasury Department today announced that companies that repay loans mistakenly received under the Paycheck Protection Program (PPP) are still eligible to access the Employee Retention Credit (ERC).

Enacted as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-36), the PPP provides certain small businesses (500 or fewer employees) with forgivable loans to pay up to 8 weeks of payroll costs and certain other expenses.

The ERC, also enacted as part of the CARES Act, provides a refundable tax credit to eligible employers for certain employment taxes equal to 50 percent of up to $10,000 in qualified wages paid to employees, effective March 12, 2020 through December 31, 2020.

Employers that access PPP loans are not eligible for the ERC. However, in an FAQ issued today, the Treasury Department explains:

45. Question: Is an employer that repays its PPP loan by the safe harbor deadline (May 14, 2020) eligible for the Employee Retention Credit?

Answer: Yes. An employer that applied for a PPP loan, received payment, and repays the loan by the safe harbor deadline (May 14, 2020) will be treated as though the employer had not received a covered loan under the PPP for purposes of the Employee Retention Credit. Therefore, the employer will be eligible for the credit if the employee is otherwise an eligible employer for purposes of the credit.

Just yesterday, the Treasury Department announced that companies that mistakenly received a PPP loan will have an extra week to repay the loan without penalty. As such, the deadline was extended from May 7, 2020 to May 14, 2020.

The updated FAQs issued by the Treasury Department are posted here.

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