What Are the ERC Aggregation Rules?

July 7, 2023
Dayes Law Firm

As a business owner, you likely want to take advantage of the ERC. This may be straightforward enough if you only have one company; if you own multiple businesses, however, you may be uncertain how to proceed.

What are the ERC aggregation rules, and how do they affect your eligibility? 

What is the ERC?

The pandemic affected countless businesses nationwide. The Employee Retention Credit (ERC) aims to help them. This refundable tax credit rewards any employers who kept employees throughout 2020 and 2021. Eligible employers may receive thousands of dollars per employee, although the amount varies.

How Are Eligible Employers Decided?

To count as an eligible employer, your business either:

  • Must have experienced full or partial suspension of business operations during 2020 and 2021
  • Must have had a significant decline in gross receipts

The actual credit amount is calculated by how many employers a business retained. Any related individuals — for example, a sibling who provided work for the company — are excluded from this calculation.

If a single employer owns multiple companies, they are aggregated. You’ll calculate gross receipts, employees, maximum credit, and suspension for the group as a whole rather than for each business as a separate entity.

For example, say you owned a couple of local restaurants. Because of the COVID-19 restrictions, each restaurant experienced a decline in business. According to the ERC aggregation rules, the gross receipts for each restaurant would be combined and compared against those of previous years. If the amount declined over 50%, you’d be eligible. You would also aggregate the total employees across the restaurants to determine your total tax credit.

Aggregation may seem intimidating, but it can be beneficial for employers. For example, say one business met the requirements while another didn’t. When you aggregate the two, however, you may meet the requirements overall — which means you can still take advantage of the credit for both businesses.

Types of Aggregated Companies

You can separate aggregated companies into three controlled groups:

  • Parent-Subsidiary: In a parent-subsidiary, one business owns more than 50% of the other businesses — for example, if a construction company also owns a landscaping company.
  • Brother-Sister Controlled Group: In a brother-sister controlled group, five or fewer people own 80% or more of the businesses and have at least 50% voting power. An individual who owned multiple businesses would fall into this category.
  • Combined Group of Corporations: Not every business falls neatly into one of the two above categories. This option encompasses combinations of the above.

Learn More About the ERC Aggregation Rules by Contacting Dayes Law Firm

The ERC aggregation rules can be intimidating. You may know you should aggregate your companies, but that doesn’t mean you know whether they’re eligible for the credit. Trying to determine eligibility on your own is often difficult. That is why we recommend you reach out to a qualified attorney for assistance.

At Dayes Law Firm, we have a thorough understanding of how the ERC works in all situations. We can help you aggregate data from your businesses to determine whether they meet the eligibility requirements. From there, we can help you calculate the number of employees and how much each is worth.

We understand how confusing this sort of process can be. That’s why we aim to offer reliable guidance throughout every step of the process. We can assist with paperwork, offer advice, and otherwise guide you. If you need help understanding the ERC aggregation rules, call 800-503-2000 or fill out our contact form.