Focus on Taxation:

Nominal Effect Defined for the Employee Retention Credit


Notice 2021-20 provides much needed guidance on the 2020 Employee Retention Credit (ERC), including a definition of the word “nominal” as it is used in in determining whether a business has sustained a partial shutdown. As a reminder, the ERC may be available to employers if they have either a full or partial shutdown as a result of a qualifying governmental order, or a significant decline in gross receipts.
A full shutdown of the business may be easy to identify, however, a partial suspension of business operations is much more gray. In its FAQs, the IRS uses the term “nominal” in two different contexts for the purposes of evaluating whether a business is subject to a partial shutdown. Unfortunately, in its FAQs, the Service never expanded on what, exactly, “nominal” means.

Notice 2021-20 provides guidance for both situations.
 
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