The bipartisan Infrastructure Investment and Jobs Act, which was passed in mid-November, is a wide-ranging law aimed at nationwide infrastructure improvements and transportation. It also includes a COVID-19 tax provision pertaining to an employee retention credit.

First, here are a few selected ag and rural-related sections of the 1,039-page law.

Broadband internet access. The law outlines broadband grants for unserved and underserved locations, appropriating $42.45 billion. It also continues to increase access to broadband by making it more affordable. Affordable connectivity rates are determined by income levels and other factors of local regions. In total, Congress appropriated approximately $65 billion to broadband-related improvements.

Bioproduct pilot. The law initiates a bioproduct pilot program for use of agricultural commodities in consumer and construction goods. This appropriation is relatively small at $2 million.

Watershed programs. The law appropriates $918 million to USDA Natural Resources Conservation Service for watershed-related programs, and an additional $2 billion in support of broadband to USDA Rural Development’s Rural Utilities Service’s Distance Learning, Telemedicine and Broadband Program.

In terms of agricultural appropriations, these amounts are relatively minimal — outside of the large rural infrastructure and broadband appropriations. It is expected, if further legislation is passed in 2021, that more agriculture-related provisions will be included.

Termination of employee retention credit

The Infrastructure Act also addresses revenue and other related matters to funding the overall cost of the law. The act terminates the COVID-19-related employee retention credit (ERC), making the fourth quarter of 2021 ineligible for tax credit.

ERC, first authorized in March 2020 through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, is a fully refundable payroll tax credit that incentivized employers to keep employees employed by lowering payroll tax liability. Originally, ERC was not allowed if a business participated in the Paycheck Protection Program (PPP).

For many ag employers, PPP was more financially beneficial. ERC was not very popular with farmers in 2020.

The Consolidated Appropriations Act, passed in December 2020, retroactively allowed PPP participants to qualify for ERC if they met the decline in gross receipts test and/or faced a closure due to COVID-19. Employers borrowing under PPP were eligible if they met ERC qualifications and had additional wages available not already covered by PPP funds. The CAA also modified some of ERC provisions and extended the ERC into the first and second quarters of 2021.

The American Rescue Plan Act, passed in March, extended ERC into the third and fourth quarters of 2021. Due to these changes in ERC, the tax credit become more widely used by agricultural employers as time continued.

For 2020, to qualify under the gross receipts reduction, a business must have had more than a 50% decline in a quarter as compared to 2019. In 2021, the gross receipts reduction threshold became easier to meet, at just a 20% or more decline in a quarter as compared to 2019.

The 2021 ERC covers up to 70% of qualified wages, while the 2020 ERC covered up to 50% of qualified wages. Due to the unique rules of ERC, if a business qualified for one quarter under the gross receipts calculation, the next quarter was also eligible.

With the passage of the Infrastructure Investment and Jobs Act, businesses were advised that the fourth quarter 2021 is no longer eligible for ERC, and the program concluded Oct. 1. The only exception is for recovery startup businesses, which are able to continue to claim the credit, if eligible, through Jan. 1. Keep in mind that legislation may change. The information presented here is educational in nature and not financial, tax or legal advice.

Roberts is an Extension educator with the University of Minnesota Agricultural Business Management team.

Source: University of Minnesota Extension, which is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all of its subsidiaries are not responsible for any of the content contained in this information asset.