Early Employee Retention Credit Termination

President Biden recently signed a $1.2 trillion infrastructure bill into law, finalizing a key part of his economic agenda. The infrastructure bill is mainly a spending bill that is designed to make investments in roads, bridges, clean water, expanded access to high-speed internet, and the like. Although the bill does not contain many significant tax provisions, its changes to the employee retention credit (ERC) will likely have a significant impact on businesses that were planning to claim ERC benefits for the 4th quarter of2021. The ERC, initially created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and later amended by the Consolidated Appropriations Act, 2021, was set to expire after June 30, 2021. Subsequently, the American Rescue Plan Act extended the ERC and made it available to eligible employers for wages paid during the 3rd and 4th quarters of 2021. However, the recently passed infrastructure bill repeals the 4th-quarter extension, effectively making wages paid after September 30, 2021 ineligible for the credit. The IRS is currently updating its guidance on claiming the credit to reflect this change.

Cryptocurrency Reporting

The infrastructure bill includes several new reporting requirements for brokers of digital assets and those receiving digital assets in their trade or business. Based on the bill, all cryptocurrency exchanges(e.g., Coinbase, Gemini, Robinhood, etc.) will be considered “brokers” and will be subject to the same reporting requirements as traditional brokers. Specifically, they will be required to provide the IRS with the name, address, and phone number of each customer; the gross proceeds from any sale of digital assets; the capital gain or loss from these sales; and the holding period of the assets sold on Form 1099-B as normally would be required in the case of traditional assets, such as stocks and bonds. Reporting guidance from the IRS is not yet official, and these new reporting requirements go into effect Jan. 1, 2023.

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Report of Cash Payments Over $10,000

In addition to the previously mentioned reporting requirements for brokers, the infrastructure bill expands the definition of “cash” for purposes of the anti-money-laundering “cash reporting” requirements (Form8300). Historically, any person engaging in a trade or business that receives more than $10,000 in cash in one transaction (or in two or more related transactions) is required to file Form 8300. The infrastructure bill adds digital assets to the definition of “cash” for purposes of Form 8300 filing requirements, thereby requiring persons that receive greater than $10,000 worth of digital assets in the course of their business to report those transactions. This rule is scheduled to go into effect as of January 1, 2024.

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Other Tax Provisions

The infrastructure bill also includes several other tax provisions that will enact the following:

·    Make automatic extensions available for certain taxpayers impacted by federally declared disasters

·    Expand the type of projects that can be funded with tax-exempt bonds

·    Restore the exemption for capital contributions to regulated public utility companies

·    Delay the reduction of various excise fuel taxes

If you have any questions about the tax provisions included in the infrastructure bill and its impact on your businesses, or if you require any other assistance with your tax planning and/or compliance needs, please do not hesitate to contact one of our knowledgeable team members.