What Challenges Arise When Financial Institutions Claim the ERTC?

December 2, 2023
Dayes Law Firm

The COVID-19 pandemic hit many industries hard, and financial institutions are no exception. The government introduced the ERTC (Employee Retention Tax Credit) to reduce the pandemic’s impact, and now, many businesses aim to claim it.

Financial institutions like banks, however, may face unique complications that could prevent them from being eligible.

What Is the ERTC?

The Employee Retention Tax Credit (ERTC) encourages employers to retain staff during the COVID-19 pandemic. Employers could claim a tax credit for any part-time and full-time employees equal to:

  • Up to 50% of qualified wages in 2020
  • Up to 70% of qualified wages for the first three quarters of 2021

Eligible employers must meet one of two criteria to qualify for the ERTC: either they must have experienced a suspension of operations due to a governmental order or a gross decline in receipts between 2019 and 2020/2021. In 2020, that meant gross receipts decreased by 50% or more for the same quarter in 2019; in 2021, that percentage lowered to 20%.

Can Banks Qualify for the ERTC?

The ERTC for financial institutions is more complex than for other industries. While banks can qualify, they face challenges other businesses may not have to navigate.

Banks May Not Meet the Suspension of Operations Requirement

Banks were considered essential businesses during the COVID-19 pandemic. As such, they continued operating, which generally means they don’t meet the suspension of operations requirement.

There is one slight caveat, however: Many banks closed their lobbies during the pandemic to meet requirements related to social distancing and group meetings. 

Lobby closures could count as a partial suspension of operations, which may qualify a bank for the ERTC. This, however, depends on why the bank closed their lobby; if they closed it in response to governmental orders, they may be able to claim the ERTC. But if they closed it for other reasons, they likely don’t qualify.

Banks May Have Difficulty Calculating Gross Receipts

For some companies, calculating gross receipts is a relatively straightforward process. Banks, however, may have some difficulties doing so. Banks often measure the income from the sale of loans, securities, and more in different ways; for example, one bank may measure gross receipts based on gross sales, while another may measure them based on net gain. In addition, if banks participated in the Paycheck Protection Program (PPP), they may face additional complications.

Unfortunately, the IRS doesn’t give clear instructions on calculating gross receipts. Because of this, financial institutions should use whatever methods they’ve used previously to calculate gross receipts.

Do You Qualify for the ERTC? Request Help From Dayes Law Firm

Determining eligibility for the ERTC is complicated, especially for financial institutions. If you operate a bank, you should do the following:

  • Calculate gross receipts based on previous years’ models
  • Determine whether governmental orders caused lobby closures
  • Check whether governmental orders disrupted any other operations

Trying to determine eligibility may seem daunting. Partnering with an attorney can help reduce your stress. 

At Dayes Law Firm, we have experience with the ERTC for financial institutions and can help you determine whether your bank is eligible. Our attorneys can assess your situation, offer advice, and help you file your claim. 

If you’d like to learn more, call 866-875-1005 and request a consultation. Reach out to Dayes Law Firm for help with the ERTC today!