The COVID-19 pandemic caused significant strife and put a strain on many industries. The Employee Retention Credit (ERC), a.k.a. the Employee Retention Tax Credit (ERTC), introduced by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, provides eligible employers with financial relief. Qualified employers may claim a portion of qualified wages for employees on their staff should they meet the right requirements.
Nonprofits, including hospitals, may be eligible for the credit. However, the ERTC for nonprofit hospitals comes with additional filing considerations. Dayes Law Firm is here to help you understand these considerations and how to navigate the filing process.
How Does the ERTC Work for Tax-Exempt Organizations?
The ERTC determines eligible employers and nonprofits through the following criteria:
- Full or partial suspension of operations – Governmental orders may have forced you to temporarily suspend operations to comply with safety regulations, which may qualify you for the ERTC.
- Gross decline in receipts – If your gross receipts declined by 50% in 2020 or by 20% in the first three quarters of 2021, you may be considered eligible for the ERTC.
So long as your nonprofit hospital meets one of the above criteria, it qualifies for the credit.
Determining Eligibility
Determining eligibility for full or partial suspension of operations is relatively simple; so long as a governmental order forced you to suspend operations temporarily, you qualify.
Calculating gross receipts, however, works differently for nonprofits since they operate differently from traditional businesses. As a nonprofit hospital, gross receipts would include:
- Any contributions, gifts, or grants given to your hospital
- Any sales of assets or services
- Dues or assessments from anyone in affiliated organizations
- Money from any investments
Calculate the total amount from these income sources. If it fell between 2019 and the same quarter in 2020 or 2021, you may be eligible for the ERTC.
In addition, nonprofits should consider the ERTC a conditional contribution, which means that the nonprofit must overcome certain barriers and that the provider has a right to reclaim assets or free themselves of their obligations to the nonprofit. When you meet these conditions depends on which eligibility option you pursue.
Other Considerations
Claiming the ERTC for nonprofit hospitals shares many similarities with claiming it for standard businesses; however, nonprofits have additional filing concerns to keep in mind.
The ERTC and Other Financial Aid Programs
Unlike other businesses, your nonprofit hospital can’t use the wages you use for the ERTC for other credits or programs.
Reporting the ERTC on Financial Statements
Nonprofits will need to report the ERTC on any financial statements. Therefore, your nonprofit hospital must take this into account when filing. Your statement should include:
- Statement of Financial Position: This should include how much you expect to claim for your credit.
- Statement of Activities: This should include the gross amount of ERTC revenue.
- Disclosures: Disclosures should include how much you claimed for the ERTC, your eligibility requirements, and anything else that seems important.
Non-compliance Concerns
If you don’t have enough documentation, you could face non-compliance concerns when filing for the credit. Gather as many files as possible and prepare yourself for a potential IRS audit; make sure you work closely with auditors to prevent misunderstandings.
Dayes Law Firm Can Help Nonprofit Organizations With Their Claims
Claiming the ERTC for nonprofit hospitals may be a somewhat intimidating endeavor. At Dayes Law Firm, we want to assist our clients throughout the process. We offer guidance for nonprofits, helping them understand eligibility requirements, the filing process, and more.
If you’d like to learn more about what we do, call 866-875-1005. Get in touch to speak to an attorney today!