How Does the ERTC Apply to Businesses in the Energy Sector?

November 9, 2023
Dayes Law Firm

Businesses in the energy industry have numerous opportunities for claiming government benefits, such as research and development (R&D) tax credits, but can they qualify for the Employee Retention Tax Credit? Qualifying for the ERTC is more challenging for energy sector industries than typical small businesses, but not impossible. If you want to know whether your business can claim ERTC benefits, you’ve come to the right place. 

At Dayes Law Firm, our experienced ERTC attorneys help businesses understand eligibility requirements, how to qualify for the credit, and more. Read on to learn whether the ERTC applies to businesses in the energy sector. 

What Is the Employee Retention Tax Credit?

The Employee Retention Tax Credit helps businesses and tax-exempt organizations recover from financial impacts caused by the COVID-19 pandemic. Eligible businesses that experienced certain financial losses but continued to pay wages to their employees between March 13, 2020, and December 31, 2021, may qualify for the refundable tax credit. Qualified employers must file Form 941-X (Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund) to amend their previous tax return. 

What Are the ERTC Requirements?

The ERTC requirements have become more lenient, though they still aim to offer benefits to smaller companies. To qualify for the ERTC, you must have paid wages to your employees during the designated period and fall into one of the following categories:

· Local government orders caused your business to close partially or fully in 2020 or 2021.

· Your business had a significant decline in gross receipt by 50% compared to the same quarter in 2019 for 2020 claims or 20% for 2021 claims.

For 2020 claims, businesses must have 100 or fewer employees to qualify. The limit increased to 500 employees for 2021 Q1 and Q2 claims to accommodate slightly larger businesses. 

Can Energy Companies Qualify for the ERTC?

The ERTC for energy sector businesses is challenging to qualify for, even with the more lenient restrictions. Claims for 2021 offer a smaller decrease in gross receipts and a larger company size, though even with this, many energy companies may not qualify. 

Many energy businesses continued normal operations during the COVID-19 pandemic as homeowners maintained their energy usage. Additionally, some major energy corporations are too large to qualify for the program. 

That said, your company could still qualify if you meet all the requirements listed above. If you’re unsure whether your business qualifies for the ERTC, you could meet with a tax attorney to gain more clarity. 

Key Energy Sector Metrics on Gross Receipts During the Eligible Periods

The energy sector may not have experienced sharp declines during the COVID-19 pandemic, like other industries, but that doesn’t mean it didn’t suffer losses. Here are some statistics that show why your business could qualify using the “significant decline in gross receipts” clause:

·      Pricing: When looking at the Marcellus Basin, the Dominion South Point 12-month average price decreased by 47% when comparing Q1 2019 to Q4 2020. 

·      Rig counts: The Baker Hughes rig count report showed a 50% decrease in rig counts from Q1 of 2019 to the first two quarters of 2021. 

·      Well permits: The Pennsylvania Department of Environmental Protection permitted 1,478 unconventional wells in 2019 compared to 920 in 2020. 

Your business might have experienced similar losses. If so, you may be eligible for the tax credit. 

Does Your Company Qualify? Find Out Today

Find out whether your company qualifies for the ERTC for energy sector business by calling Dayes Law Firm today at (866) 257-1223 to meet with one of our experienced ERTC attorneys.