President Biden signed the $1 trillion bipartisan Infrastructure Investment and Jobs Act on Nov. 15. This infrastructure bill does contain a few tax provisions.

The Infrastructure Investment and Jobs Act terminates the employee retention tax credit (ERTC) for most employers earlier than expected. The credit will cease after Q3 of 2021 for employers other than startup recovery businesses. A startup recovery business is defined as a business that began conducting any trade or business after February 15, 2020, had average annual gross receipts not exceeding $1 million and does not otherwise qualify for the ERTC either by full or partial closure or significant decline in gross receipts requirements.

Now that we are in Q4 2021, a business will not be eligible for the ERTC, unless the employer qualified under prior rules satisfying the Startup Recovery Business rules.

Because of this early termination of the ERTC credit, employers that monetized credits for Q4 to reduce employment tax deposits will be required to repay these amounts. It is not clear whether the IRS will impose late deposit penalties and interest. The IRS normally claims no ability to abate interest but can abate a penalty based on reasonable cause. We expect the IRS will provide notification of a penalty waiver procedure for this situation.

We expect that there will be major tax provisions on the Biden Administration’s agenda that are still under consideration within Build Back Better Act. We will update you when we have more details.

If you have questions, contact your tax advisor or fill out our contact us form for further discussion.

Q: What tax law changes are in the Infrastructure Investment and Jobs Act?

A: The law focuses on infrastructure investments, but it also includes a few tax provisions:

Employee Retention Credit ends early. The American Rescue Plan Act (ARPA) had extended the CARES Act’s Employee Retention Credit (ERC) to eligible employers for the third and fourth quarters of 2021. The IIJA generally eliminates the credit for the fourth quarter. Under the new law, the ERC is no longer available for wages paid after Sept. 30, 2021 (rather than Dec. 31, 2021), except for so-called “recovery startup businesses.”

Digital assets subject to new reporting requirements. The IIJA requires brokers to report to the IRS the cost basis of digital assets (such as cryptocurrency and certain nonfungible tokens) transferred by their clients to nonbrokers. The new law also expands the definition of the term “broker” and modifies existing tax law to treat digital assets as cash, which may require submission of IRS Form 8300, “Report of Cash Payments Over $10,000 Received in a Trade or Business,” when such amounts are received. The provisions don’t take effect for returns required to be filed, and statements required to be furnished, after Dec. 31, 2023.

Changes to other tax provisions. The IIJA expands certain IRS administrative relief for taxpayers affected by federally declared disasters and “significant fires.” It also extends:

  • Several excise taxes used to fund highway spending,
  • Certain Superfund excise taxes (with modifications), and
  • Pension funding relief.

And it allows private activity bonds for qualified broadband projects and carbon dioxide capture facilities.

LBMC tax tips are provided as an informational and educational service for clients and friends of the firm. The communication is high-level and should not be considered as legal or tax advice to take any specific action. Individuals should consult with their personal tax or legal advisors before making any tax or legal-related decisions. In addition, the information and data presented are based on sources believed to be reliable, but we do not guarantee their accuracy or completeness. The information is current as of the date indicated and is subject to change without notice.