Temporary Regulations: Recapture of Excess Employment Tax Credits (TD 9904) — Federal Register, July 29, 2020
Summary
Pages of the Federal Register of Wednesday, July 29, 2020, Rules and Regulations, starting at page 45514, with a Department of the Treasury, Internal Revenue Service document, TD 9904, with the heading Recapture of Excess Employment Tax Credits Under the Families First Act and the CARES Act, issued as temporary regulations that amend the regulations under sections 3111 and 3221 of the Internal Revenue Code. The temporary regulations authorize the assessment of any erroneous refund of the credits paid under sections 7001 and 7003 of the Families First Coronavirus Response Act and section 2301 of the CARES Act. The pages also carry a U.S. Department of State notice extending temporary suspensions, modifications, and exceptions to December 31, 2020.
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Cite this document
“Temporary Regulations: Recapture of Excess Employment Tax Credits (TD 9904) — Federal Register, July 29, 2020.”
Original at www.govinfo.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/17-employee-retention-credit-recapture-of-excess-employment-tax-credits-under-the-families-first-act-and-the-cares-act/
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45514 Federal Register / Vol. 85, No. 146 / Wednesday, July 29, 2020 / Rules and Regulations
this length also will provide an DDTC further notes that several Authority: 22 CFR 126.2 and 126.3.
extended operational window for commenters requested additional Zachary A. Parker,
regulated entities during the course of measures be taken by DDTC. DDTC is
Director, Office of Directives Management,
the public health crisis. DDTC believes not adopting any of those measures at U.S. Department of State.
that a failure to extend these temporary this time. Although DDTC is not
[FR Doc. 2020–15777 Filed 7–28–20; 8:45 am]
suspensions, modifications, and providing individual responses to those
BILLING CODE 4710–25–P
exceptions will have a negative impact requests, DDTC notes generally that
on regulated entities’ ability to safely several of the requests would involve
engage in continued operations. As major infrastructure revisions to DDTC
persons and entities subject to the automated systems and are therefore not DEPARTMENT OF THE TREASURY
regulations or operating pursuant to a feasible as temporary suspensions,
Internal Revenue Service
license or other approval are located modifications, or exceptions; others
around the world, it is apparent that were outside the scope of the request;
26 CFR Part 31
physical presence may contradict public and others involved matters of internal
health guidance or legal requirements in policy and practice and not regulatory [TD 9904]
many instances. For these reasons, matters. For all regulatory matters RIN 1545–BP89
DDTC is extending the termination date recommended, DDTC will continue to
prescribed in 85 FR 25287, items consider those that may merit future Recapture of Excess Employment Tax
number 3 and number 4. possibility of action. Credits Under the Families First Act
The temporary suspension, Therefore, pursuant to ITAR §§ 126.2 and the CARES Act
modification, and exception to the and 126.3, in the interest of the security AGENCY: Internal Revenue Service (IRS),
requirement in ITAR parts 122 and 129 and foreign policy of the United States
to renew registration as a manufacturer, Treasury.
and as warranted by the exceptional and
exporter, and/or broker and pay a fee on ACTION: Temporary regulations.
undue hardships and risks to safety
an annual basis described at number 1 caused by the public health emergency SUMMARY: This document amends the
of 85 FR 25287, is not being extended related to the SARS–COV2 pandemic, regulations under sections 3111 and
to subsequent registrations. DDTC did notice is provided that the following 3221 of the Internal Revenue Code with
not receive any request from industry temporary suspensions, modifications, the addition of temporary regulations
for additional extensions to registrations and exceptions are being extended as issued under the regulatory authority
that terminate after June 30. To the follows: granted by the Families First
contrary, several commenters expressed Coronavirus Response Act and the
1. As of March 13, 2020, a temporary
their appreciation for the original Coronavirus Aid, Relief, and Economic
suspension, modification, and exception
action, but noted that any extension Security Act to prescribe such
to the requirement that a regular
would be unnecessary. DDTC’s regulations as may be necessary for
employee, for purposes of ITAR
experience since the original temporary reconciling advance payments of
§ 120.39(a)(2), work at the company’s
suspension, modification, and exception refundable employment tax credits
facilities, to allow the individual to
is that registrants are able to use DDTC’s provided under these acts and
work at a remote work location, so long
DECCS online system for the purpose of recapturing the benefit of the credits
as the individual is not located in
registration in the normal course of when necessary. Consistent with this
Russia or a country listed in ITAR
business. authority, these temporary regulations
§ 126.1. This suspension, modification,
The temporary suspension, and exception shall terminate on authorize the assessment of any
modification, and exception to the December 31, 2020, unless otherwise erroneous refund of the credits paid
limitations on the duration of ITAR extended in writing. under sections 7001 and 7003 of the
licenses and agreements described at Families First Coronavirus Response
number 2 of 85 FR 25287, is not 2. As of March 13, 2020, a temporary
suspension, modification, and exception Act, including any increases in such
extended. Although several commenters credits under section 7005 thereof, and
expressed appreciation for the original to authorize regular employees of
licensed entities who are working section 2301 of the Coronavirus Aid,
action, one commenter indicated a Relief, and Economic Security Act. The
preference that it not be extended. remotely in a country not currently
authorized by a technical assistance text of these temporary regulations also
Although three commenters did request serves as the text of the proposed
extension for various reasons, DDTC is agreement, manufacturing license
agreement, or exemption to send, regulations (REG–111879–20) set forth
not accepting those requests. DDTC in the notice of proposed rulemaking on
notes that the majority of commenters receive, or access any technical data
authorized for export, reexport, or this subject in the Proposed Rules
did not make such a request, and that section of this issue of the Federal
of those that did, some of the reasons retransfer to their employer via a
technical assistance agreement, Register.
related to internal DDTC operations and
coordination with other areas of the manufacturing license agreement, or DATES:
government. DDTC believes that exemption so long as the regular Effective Date: These temporary
progress is being made on those matters employee is not located in Russia or a regulations are effective on July 29,
and that continued extensions to all country listed in ITAR § 126.1. This 2020.
suspension, modification, and exception Applicability Date: For date of
existing authorizations is an overbroad
shall terminate on December 31, 2020, applicability, see §§ 31.3111–6T and
response to the current situation. DDTC,
unless otherwise extended in writing. 31.3221–5T of these temporary
its interagency partners, and the
regulations.
regulated entities have had several This notice makes no other revision to
months to adjust to the current situation the notice published at 85 FR 25287, nor FOR FURTHER INFORMATION CONTACT:
and DDTC believes it is prepared to does it make any other temporary Concerning these temporary regulations,
handle authorizations in accordance suspension, modification, or exception NaLee Park at 202–317–6798.
with its statutory requirements. to the requirements of the ITAR. SUPPLEMENTARY INFORMATION:
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Federal Register / Vol. 85, No. 146 / Wednesday, July 29, 2020 / Rules and Regulations 45515
Background unable to work or telework for reasons employees. Under section 7005 of the
I. The Statutes in General: The Families related to COVID–19 described in (4), Families First Act, the qualified leave
First Act and the CARES Act (5), or (6) above is entitled to paid sick wages are not subject to the taxes
leave at two-thirds the employee’s imposed on employers by sections
The Families First Coronavirus regular rate of pay or, if higher, the 3111(a) and 3221(a) of the Code. In
Response Act (Families First Act), Federal minimum wage or any addition, section 7005 provides that the
Public Law 116–127, 134 Stat. 178 applicable State or local minimum credits under sections 7001 and 7003 of
(2020), enacted on March 18, 2020, and wage, up to $200 per day and $2,000 in the Families First Act are increased by
the Coronavirus Aid, Relief, and the aggregate. the amount of the tax imposed by
Economic Security Act (CARES Act), Division C of the Families First Act, section 3111(b) of the Code (employer’s
Public Law 116–136, 134 Stat. 281 the Emergency Family and Medical share of Medicare tax) on qualified leave
(2020), enacted on March 27, 2020, Leave Expansion Act (EFMLEA), wages.3
provide relief to taxpayers from amends the Family and Medical Leave The CARES Act provides an
economic hardships resulting from the Act of 1993 to require certain employers additional credit for employers
Coronavirus Disease 2019 (COVID–19). to provide expanded paid family and experiencing economic hardship related
The Families First Act, through the medical leave to employees who are to COVID–19. Under section 2301 of the
enactment of the Emergency Paid Sick unable to work or telework for reasons CARES Act, certain employers who pay
Leave Act and the Emergency Family related to COVID–19. An employee can qualified wages to their employees are
and Medical Leave Expansion Act, receive up to 10 weeks of paid family eligible for an employee retention
generally requires employers with fewer and medical leave at two-thirds the credit. Employers eligible for the
than 500 employees to provide paid employee’s regular rate of pay, up to employee retention credit are employers
leave due to certain circumstances $200 per day and $10,000 in the that carry on a trade or business during
related to COVID–19. aggregate if the employee is unable to calendar year 2020 and tax-exempt
Division E of the Families First Act, work or telework because the employee organizations that either have a full or
the Emergency Paid Sick Leave Act is caring for a son or daughter whose partial suspension of operations during
(EPSLA), requires certain employers to school or place of care is closed or any calendar quarter in 2020 due to an
provide employees with up to 80 hours whose child care provider is unavailable order from an appropriate governmental
of paid sick leave if the employee is for reasons related to COVID–19. authority limiting commerce, travel, or
unable to work or telework because the Sections 7001 and 7003 of the group meetings (for commercial, social,
employee: Families First Act generally provide that religious, or other purposes) due to
(1) Is subject to a Federal, State, or employers subject to the paid leave COVID–19, or experience a significant
local quarantine or isolation order requirements under EPSLA and decline in gross receipts during the
related to COVID–19; EFMLEA (‘‘eligible employers’’) are calendar quarter.
(2) has been advised by a health care entitled to fully refundable tax credits to Qualified wages are wages (as defined
provider to self-quarantine due to cover the cost of the leave required to in section 3121(a) of the Code) and
concerns related to COVID–19; be paid for those periods of time during compensation (as defined in section
(3) is experiencing symptoms of which employees are unable to work or 3231(e) of the Code) paid by an
COVID–19 and seeking a medical telework for reasons related to COVID– employer to some or all employees after
diagnosis; 19.2 March 12, 2020, and before January 1,
(4) is caring for an individual who is Eligible employers are entitled to 2021, and include the employer’s
subject to a Federal, State, or local receive a refundable credit equal to the qualified health plan expenses that are
quarantine or isolation order related to amount of the qualified sick leave wages properly allocable to such wages or
COVID–19, or has been advised by a and qualified family leave wages compensation. For employers that
health care provider to self-quarantine (collectively ‘‘qualified leave wages’’), averaged more than 100 full-time
due to concerns related to COVID–19; plus allocable qualified health plan employees during 2019, qualified wages
(5) is caring for a son or daughter of expenses. Under the respective are wages and compensation (including
such employee if the school or place of provisions, qualified leave wages are allocable qualified health plan
care of the son or daughter has been defined to mean wages (as defined in expenses), up to $10,000 per employee,
closed, or the child care provider of section 3121(a) of the Internal Revenue paid to employees that are not providing
such son or daughter is unavailable, due Code (Code)) and compensation (as services because operations were fully
to COVID–19 precautions; or defined in section 3231(e) of the Code) or partially suspended due to orders
(6) is experiencing any other paid by an employer which are required from an appropriate governmental
substantially similar condition specified to be paid under the EPSLA and authority or due to a decline in gross
by the Secretary of Health and Human EFMLEA. See section 7001(c) and receipts. For employers who averaged
Services in consultation with the 7003(c). The credit is allowed against 100 full-time employees or fewer during
Secretaries of the Treasury and Labor.1 the taxes imposed on employers by 2019, qualified wages are wages and
An employee who is unable to work section 3111(a) of the Code (the Old- compensation (including allocable
or telework for reasons related to Age, Survivors, and Disability Insurance qualified health plan expenses), up to
COVID–19 described in (1), (2), or (3) tax (social security tax)), first reduced $10,000 per employee, paid to any
above is entitled to paid sick leave at the by any credits claimed under sections employee during the period operations
3111(e) and (f) of the Code, and section
employee’s regular rate of pay or, if were suspended due to orders from an
3221(a) of the Code (the Railroad
higher, the Federal minimum wage or
Retirement Tax Act Tier 1 tax), on all
any applicable State or local minimum 3 The credit for the employer’s share of Medicare
wages and compensation paid to all tax does not apply to eligible employers that are
wage, up to $511 per day and $5,110 in
subject to Railroad Retirement Tax Act (RRTA)
the aggregate. An employee who is 2 Under sections 7001(d)(4) and 7003(d)(4) of the because under section 7005(a) of the Families First
Families First Act, these credits do not apply to the Act qualified leave wages are not subject to
1 The U.S. Department of Health and Human government of the United States, the government of Medicare tax under RRTA due to that section’s
Services has not yet specified any other such any State or political subdivision thereof, or any reference to section 3221(a) of the Code, which
conditions as of July 29, 2020. agency or instrumentality of any of the foregoing. includes both social security tax and Medicare tax.
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45516 Federal Register / Vol. 85, No. 146 / Wednesday, July 29, 2020 / Rules and Regulations
appropriate governmental authority or 6413(a),4 the amount of the of the employee retention credit under
due to a decline in gross receipts, overpayment shall be refunded (subject section 2301, subject to the limitations
regardless of whether its employees are to the applicable statute of limitations) provided in section 2301 and based on
providing services. as the Secretary may prescribe in such information as the Secretary shall
The employee retention credit is a regulations. require.
The IRS has revised Form 941, To implement the advance payment
fully refundable tax credit for employers
Employer’s Quarterly Federal Tax provisions of the Families First Act and
equal to 50 percent of qualified wages. Return, and is revising Form 943, the CARES Act, the IRS has created
Because the maximum amount of Employer’s Annual Federal Tax Return Form 7200, Advance Payment of
qualified wages taken into account with for Agricultural Employees, Form 944, Employer Credits Due To COVID–19,
respect to each employee is $10,000, the Employer’s Annual Federal Tax Return, which employers may use to request an
maximum employee retention credit for and Form CT–1, Employer’s Annual advance of the paid sick or family leave
an eligible employer for qualified wages Railroad Retirement Tax Return, so that credits under the Families First Act, the
paid to any employee is $5,000. The employers may use these returns to employee retention credit under the
credit is allowed against the taxes claim the paid sick and family leave CARES Act, or two or more of them.
imposed on employers by section credits under the Families First Act and Employers are required to reconcile any
3111(a) of the Code, first reduced by any the employee retention credit under the advance payments claimed on Form
credits allowed under sections 3111(e) CARES Act. The revised employment 7200 with total credits claimed and total
and (f) of the Code and sections 7001 tax returns will provide for any credits taxes due on their employment tax
and 7003 of the Families First Act, and in excess of the taxes imposed under returns. A refund, a credit, or an
the taxes imposed under section 3221(a) sections 3111(a) or 3221(a) (for the advance of any portion of these credits
of the Code that are attributable to the employee retention credit, only the to a taxpayer in excess of the amount to
rate in effect under section 3111(a) of taxes imposed under section 3221(a) which the taxpayer is entitled is an
the Code, first reduced by any credits that are attributable to the rate in effect erroneous refund for which the IRS
allowed under sections 7001 and 7003 under section 3111(a)) to be credited must seek repayment.
of the Families First Act, on all wages against other employment taxes and
IV. Assessment Authority
and compensation paid to all then for any remaining balance to be
employees. The same wages or refunded to the employer (per section Section 6201, in general, authorizes
compensation cannot be counted for 6402(a) or section 6413(b)).5 the Secretary to determine and assess
both the Families First Act leave credits tax liabilities including interest,
III. Advance Payment of Credits and additional amounts, additions to the tax,
and the CARES Act employee retention Erroneous Refunds
credit. and assessable penalties. However, the
Section 3606 of the CARES Act general authority to assess tax liabilities
II. Refundability of Credits amends sections 7001(b)(4) and under section 6201(a) does not allow the
7003(b)(3) of the Families First Act to assessment of any non-rebate 6 portion
Sections 7001(b)(4) and 7003(b)(3) of provide that, in anticipation of the paid of an erroneous refund of a refundable
the Families First Act provide that if the sick and family leave credits under credit. Instead, non-rebate refunds are
amount of the paid sick and family these sections, including any refundable generally recovered or recaptured
leave credits under these sections portions (which would include any through voluntary payment or litigation.
exceeds the taxes imposed by section increases in the credits under section The government by appropriate action
3111(a) or 3221(a) of the Code for any 7005), these credits may be advanced, can bring civil litigation to recover
calendar quarter, such excess shall be according to forms and instructions funds which its agents have wrongfully,
treated as an overpayment that shall be provided by the Secretary, up to the erroneously, or illegally paid, and no
refunded under sections 6402(a) and total allowable amount and subject to statute is necessary to authorize the
6413(b) of the Code. Section 2301(b)(3) applicable limits for the calendar government to sue in such a case, since
of the CARES Act provides that if the quarter. Section 2301(l)(1) of the CARES the right to sue is independent of
amount of the employee retention credit Act provides that the Secretary shall statute. United States v. Wurts, 303 U.S.
exceeds the taxes imposed by section issue such forms, instructions, 414, 415 (1938), citing United States v.
3111(a) or 3221(a) (limited to the regulations, and guidance as are The Bank of the Metropolis, 40 U.S. 377
portion attributable to the rate in effect necessary to allow the advance payment (1841). However, the statutory language
under section 3111(a)) of the Code for of the Families First Act and the CARES
any calendar quarter, such excess shall 4 Section 6413(a) addresses interest-free Act provides for the administrative
adjustments of overpayments. The section provides recapture of these non-rebate refunds by
be treated as an overpayment that shall that if more than the correct amount of employment
be refunded under sections 6402(a) and tax imposed by section 3101, 3111, 3201, 3221, or
authorizing the promulgation of
6413(b) of the Code. 3402 is paid with respect to any payment of regulations or other guidance to do so.
remuneration, proper adjustments with respect to Sections 7001 and 7003 of the
Section 6402(a) of the Code provides both the tax and the amount to be deducted, shall Families First Act and section 2301 of
that, within the applicable period of be made, without interest, in such manner and at
the CARES Act grant authority to the
limitations, overpayments may be such times as the Secretary may by regulations
prescribe. Department of the Treasury (Treasury
credited against any liability in respect 5 Employment tax returns have also been revised Department) and the IRS to issue
of an internal revenue tax on the part of to provide for reporting of any deferral of regulations or other guidance to
the person who made the overpayment employment taxes under the CARES Act. Section recapture an erroneous refund of the
and any remaining balance refunded to 2302 of the CARES Act provides that employers
credits. Specifically, sections 7001(f)
such person. Section 6413(b) provides may defer the deposit and payment of the
employer’s share of social security tax for the
that if more than the correct amount of payroll tax deferral period of March 27, 2020 6 ’’Non-rebate’’ refers to the portion of any refund
employment tax imposed by sections through December 31, 2020. The deferral applies in of a credit that exceeds the IRS’s determination of
3101, 3111, 3201, 3221, or 3402 is paid addition to the credits claimed on an employment the recipient’s tax liability (i.e., the remaining
tax return, but the deferral does not reduce the portion of the refund that is paid to the recipient
or deducted and the overpayment amount of the employer’s share of social security after the refund has been applied to the recipient’s
cannot be adjusted under section tax against which the credits are applied. tax liability).
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Federal Register / Vol. 85, No. 146 / Wednesday, July 29, 2020 / Rules and Regulations 45517
and 7003(f) of the Families First Act and the CARES Act provide that the credits manner as the taxes. These temporary
section 2301(l) of the CARES Act described in these sections are taken regulations provide that the
authorize the Secretary to issue against the taxes imposed on employers determination of any amount of credits
guidance to allow for the administrative under sections 3111(a) or 3221(a) of the erroneously refunded must take into
reconciliation and recapture of Code (for the employee retention credit, account any credit amounts advanced to
erroneous refunds. Sections 7001(f) and only the taxes imposed under section an employer under the process
7003(f) of the Families First Act 3221(a) that are attributable to the rate established by the IRS in accordance
provide, in relevant part, that the in effect under section 3111(a) of the with sections 7001(b)(4)(A)(ii) and
Secretary (or the Secretary’s delegate) Code). Additionally, if the amount of 7003(b)(3)(B) of the Families First Act
shall provide such regulations or other the credit exceeds the taxes imposed and section 2301(l)(1) of the CARES Act.
guidance as may be necessary to carry under sections 3111(a) or 3221(a) of the Because in certain situations third
out the purposes of the credit, including Code (for the employee retention credit, party payors claim credits on behalf of
regulations or other guidance: (1) To only the taxes imposed under section their common law employer clients,
prevent the avoidance of the purposes of 3221(a) that are attributable to the rate these temporary regulations also
the limitations under this provision; (2) in effect under section 3111(a) of the provide that employers against whom
to minimize compliance and record- Code) for any calendar quarter, such an erroneous refund of credits can be
keeping burdens associated with the excess shall be treated as an assessed as an underpayment include
credit; (3) to provide for a waiver of overpayment to be refunded or credited persons treated as the employer under
penalties for failure to deposit amounts under sections 6402(a) and 6413(b) of sections 3401(d), 3504, and 3511 of the
in anticipation of the allowance of the the Code. Any credits claimed that Code, consistent with their liability for
credit; (4) to recapture the benefit of the exceed the amount to which the the section 3111(a) and section 3221(a)
credit in cases where there is a employer is entitled and that are taxes against which the credit applied.
subsequent adjustment to the credit; and actually credited or paid by the IRS are Finally, these temporary regulations
(5) to ensure that the wages taken into considered to be erroneous refunds of apply to all credit refunds under section
account for the credit conform with the the credits. These temporary regulations 7001 and 7003 of the Families First Act
paid sick leave and paid family leave provide that erroneous refunds of these advanced or paid on or after April 1,
required to be provided under the credits are treated as underpayments of 2020 and all credit refunds under
Families First Act. Similarly, section the taxes imposed under sections section 2301 of the CARES Act
2301(l) of the CARES Act provides in 3111(a) or 3221(a) of the Code and advanced or paid on or after March 13,
relevant part that the Secretary shall authorize the IRS to assess any portion 2020. These applicability dates
issue such forms, instructions, of the credits erroneously credited, paid, correspond to the effective dates of the
regulations, and guidance as are statutory sections that provide for these
or refunded in excess of the amount
necessary to provide for the credits and that authorize guidance to
allowed as if those amounts were tax
reconciliation of an advance payment of allow for the administrative
liabilities under sections 3111(a) and
the employee retention credit with the reconciliation and recapture of
3221(a) subject to assessment and
amount advanced at the time of filing erroneous refunds of these credits.
administrative collection procedures. Sections 7001(g) and 7003(g) of the
the return of tax for the applicable This allows the IRS to efficiently
calendar quarter or taxable year, and to Families First Act provide that sections
recover the amounts, while also 7001 and 7003 apply to wages paid with
provide for the recapture of the credit preserving administrative protections
under section 2301 of the CARES Act if respect to the period beginning on a
afforded to taxpayers with respect to date selected by the Secretary of the
such credit is allowed to a taxpayer that contesting their tax liabilities under the
receives a small business loan under Treasury which is during the 15-day
Code and avoiding unnecessary costs period beginning on the date of the
section 1102 of the CARES Act during and burdens associated with litigation.
a subsequent quarter. enactment of the Families First Act
These assessment and administrative (March 18, 2020). In Notice 2020–21,
Accordingly, this document amends
collection procedures will apply in the 2020–16 I.R.B. 660, the IRS provided
the Employment Tax Regulations (26
normal course in processing that the tax credits for qualified sick
CFR part 31) by adding temporary
employment tax returns that report leave wages and qualified family leave
regulations under sections 3111 and
advances in excess of claimed credits wages under sections 7001 and 7003 of
3221 of the Code. Concurrent with the
publication of this Treasury decision, and in examining returns for excess the Families First Act apply to wages
the Treasury Department and the IRS claimed credits. paid for the period beginning on April
are publishing in the Proposed Rules Specifically, these temporary 1, 2020, and ending on December 31,
section of this issue of the Federal regulations provide that any amount of 2020. Section 2301(m) of the CARES Act
Register a notice of proposed the credits for qualified leave wages provides that section 2301 applies to
rulemaking (REG–111879–20) on this under sections 7001 and 7003 of the wages paid on or after March 13, 2020,
subject that cross-references the text of Families First Act, plus any amount of and before January 1, 2021.
these temporary regulations. See section credits for qualified health plan Pursuant to section 7805(b)(2) of the
7805(e)(1). Interested persons are expenses under sections 7001 and 7003, Code, these temporary regulations are
directed to the ADDRESSES and and including any increases in these permitted to apply before the dates
COMMENTS AND REQUESTS FOR A credits under section 7005, and any provided under section 7805(b)(1),
PUBLIC HEARING sections of the amount of the employee retention credit including the date on which these
preamble to REG–111879–20 for for qualified wages under section 2301 temporary regulations are filed with the
information on submitting public of the CARES Act that are erroneously Federal Register, because these
comments or requesting a public refunded or credited to an employer temporary regulations are being issued
hearing on the proposed regulations. shall be treated as underpayments of the within 18 months of the date of the
taxes imposed by section 3111(a) or enactment of the relevant statutory
Explanation of Provisions section 3221(a), as applicable, by the provisions under the Families First Act
Sections 7001 and 7003 of the employer and may be administratively and the CARES Act. Accordingly, these
Families First Act and section 2301 of assessed and collected in the same temporary regulations apply to all
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45518 Federal Register / Vol. 85, No. 146 / Wednesday, July 29, 2020 / Rules and Regulations
credits under sections 7001 and 7003 of under section 553(b)(B) of the Adoption of Amendments to the
the Families First Act, as modified by Administrative Procedure Act (APA) (5 Regulations
section 3606 of the CARES Act, U.S.C. 551 et seq.). Section 553(b)(B) Accordingly, 26 CFR part 31 is
including any increases in the credits provides that an agency is not required amended as follows:
under section 7005 of the Families First to publish a notice of proposed
Act, refunded on or after April 1, 2020, rulemaking in the Federal Register PART 31—EMPLOYMENT TAXES AND
including advanced refunds, as well as when the agency, for good cause, finds COLLECTION OF INCOME TAX AT
all credits under section 2301 of the that notice and public comment thereon SOURCE
CARES Act that are refunded on or after are impracticable, unnecessary, or
March 13, 2020, including advanced contrary to the public interest. ■ Paragraph 1. The authority citation
refunds. Employers must file Form 941, for part 31 is amended by adding entries
Employer’s Quarterly Federal Tax for §§ 31.3111–6T and 31.3221–5T in
Special Analyses numerical order to read in part as
Return, for the second quarter of
The Office of Management and calendar year 2020 by July 31, 2020, as follows:
Budget’s Office of Information and required by section 6071 of the Code Authority: 26 U.S.C. 7805.
Regulatory Analysis has determined that and Treas. Reg. § 31.6071(a)–1.
these temporary regulations are not * * * * *
Employers use Form 941 to claim Section 31.3111–6T also issued under sec.
significant and not subject to review qualified leave credits under the 7001 and sec. 7003 of the Families First
under section 6(b) of Executive Order Families First Act and the employee Coronavirus Response Act of 2020 and sec.
12866. retention credit under the CARES Act, 2301 of the Coronavirus Aid, Relief, and
Pursuant to the Regulatory Flexibility as well as to report any advance of these Economic Security Act of 2020.
Act (5 U.S.C. chapter 6), the Secretary credits they received during the quarter. * * * * *
certifies that these temporary In filing their second quarter 2020 Form Section 31.3221–5T also issued under sec.
regulations will not have a significant 941, some employers will report and 7001 and sec. 7003 of the Families First
economic impact on a substantial receive, or will have already received as Coronavirus Response Act of 2020 and sec.
number of small entities because these an advance, refund amounts in excess of 2301 of the Coronavirus Aid, Relief, and
temporary regulations impose no Economic Security Act of 2020.
the refund to which they are entitled.
compliance burden on any business These temporary regulations authorize * * * * *
entities, including small entities. the assessment of any such erroneous ■ Par. 2.Section 31.3111–6T is added to
Although these temporary regulations refunds. Without these temporary read as follows:
will apply to all employers eligible for regulations, in some instances the IRS
the credits under the Families First Act may not be able to avoid bringing costly § 31.3111–6T Recapture of credits under
and the CARES Act, including small and burdensome litigation to recover the Families First Coronavirus Response
businesses and tax-exempt Act and the Coronavirus Aid, Relief, and
such reported erroneous refunds. Economic Security Act.
organizations with fewer than 500 Further, comments are being solicited in
employees, and will therefore be likely (a) Recapture of erroneously refunded
the cross-referenced notice of proposed
to affect a substantial number of small credits under the Families First
rulemaking that is in this issue of the
entities, the economic impact will not Coronavirus Response Act. Any amount
Federal Register, and any comments
be significant. These temporary of credits for qualified sick leave wages
will be considered before final
regulations do not affect the employer’s or qualified family leave wages under
regulations are issued.
employment tax reporting or the sections 7001 and 7003, respectively, of
necessary information to substantiate Statement of Availability of IRS the Families First Coronavirus Response
entitlement to the credits. Rather, these Documents Act (Families First Act), Public Law
temporary regulations merely IRS notices and other guidance cited 116–127, 134 Stat. 178 (2020), as
implement the statutory authority in this preamble are published in the modified by section 3606 of the
granted under sections 7001(f) and Internal Revenue Bulletin (or Coronavirus Aid, Relief, and Economic
7003(f) of the Families First Act and Cumulative Bulletin) and are available Security Act (CARES Act), Public Law
section 2301(l) of the CARES Act that from the Superintendent of Documents, 116–136, 134 Stat. 281 (2020), plus any
authorize the IRS to assess, reconcile, U.S. Government Publishing Office, amount of credits for qualified health
and recapture any portion of the credits Washington, DC 20402, or by visiting plan expenses under sections 7001 and
erroneously credited, paid, or refunded the IRS website at http://www.irs.gov. 7003, and including any increases in
in excess of the actual amount allowed those credits under section 7005 of the
as if the amounts were tax liabilities Drafting Information Families First Act, that are treated as
under sections 3111(a) and 3221(a) The principal author of these overpayments and refunded or credited
subject to assessment and temporary regulations is NaLee Park, to an employer under section 6402(a) or
administrative collection procedures. Office of the Associate Chief Counsel section 6413(b) of the Internal Revenue
Notwithstanding this certification, the (Employee Benefits, Exempt Code (Code) and to which the employer
Treasury Department and the IRS invite Organizations, and Employment Taxes). is not entitled, resulting in an erroneous
comments on any impact these However, other personnel from the refund to the employer, shall be treated
temporary regulations would have on Treasury Department and the IRS as an underpayment of the taxes
small entities. participated in the development of these imposed by section 3111(a) of the Code
Pursuant to section 7805(f), these temporary regulations. and may be assessed and collected by
temporary regulations have been the Secretary in the same manner as the
submitted to the Chief Counsel of the List of Subjects in 26 CFR 31 taxes.
Office of Advocacy of the Small Employment taxes, Income taxes, (b) Recapture of erroneously refunded
Business Administration for comment Penalties, Pensions, Railroad retirement, credits under the Coronavirus Aid,
on its impact on small business. Reporting and recordkeeping Relief, and Economic Security Act. Any
The Treasury Department and the IRS requirements, Social security, amount of credits for qualified wages
have determined that good cause exists Unemployment compensation. under section 2301 of the CARES Act
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Federal Register / Vol. 85, No. 146 / Wednesday, July 29, 2020 / Rules and Regulations 45519
that is treated as an overpayment and modified by section 3606 of the CARES Act advanced or paid on or after
refunded or credited to an employer Coronavirus Aid, Relief, and Economic March 13, 2020.
under section 6402(a) or section 6413(b) Security Act (CARES Act), Public Law
Sunita Lough,
of the Code and to which the employer 116–136, 134 Stat. 281 (2020), plus any
Deputy Commissioner for Services and
is not entitled, resulting in an erroneous amount of credits for qualified health
Enforcement.
refund to the employer, shall be treated plan expenses under sections 7001 and
Approved: July 14, 2020.
as an underpayment of the taxes 7003, that are treated as overpayments
imposed by section 3111(a) of the Code and refunded or credited to an employer David J. Kautter,
and may be assessed and collected by under section 6402(a) or section 6413(b) Assistant Secretary of the Treasury (Tax
the Secretary in the same manner as the of the Internal Revenue Code (Code) and Policy).
taxes. to which the employer is not entitled, [FR Doc. 2020–16302 Filed 7–24–20; 4:15 pm]
(c) Advance credit amounts resulting in an erroneous refund to the BILLING CODE 4830–01–P
erroneously refunded. The employer, shall be treated as an
determination of any amount of credits underpayment of the taxes imposed by
erroneously refunded as described in section 3221(a) of the Code and may be DEPARTMENT OF HOMELAND
paragraphs (a) and (b) of this section assessed and collected by the Secretary SECURITY
must take into account any amount of in the same manner as the taxes.
credits advanced to an employer under (b) Recapture of erroneously refunded Coast Guard
the process established by the Internal credits under the Coronavirus Aid,
Revenue Service in accordance with Relief, and Economic Security Act. Any 33 CFR Part 165
sections 7001(b)(4)(A)(ii) and amount of credits for qualified wages [Docket Number USCG–2020–0408]
7003(b)(3)(B) of the Families First Act, under section 2301 of the CARES Act
as modified by section 3606 of the RIN 1625–AA00
that is treated as an overpayment and
CARES Act, and section 2301(l)(1) of the refunded or credited to an employer Emergency Safety Zone; Lower
CARES Act. under section 6402(a) or section 6413(b) Mississippi River, Helena, AR
(d) Third party payors. For purposes of the Code and to which the employer
of this section, employers against whom is not entitled, resulting in an erroneous AGENCY: Coast Guard, DHS.
an erroneous refund of the credits under refund to the employer, shall be treated ACTION: Temporary final rule.
sections 7001 and 7003 of the Families as an underpayment of the taxes
First Act (including any increases in SUMMARY: The Coast Guard is
imposed by section 3221(a) of the Code
those credits under section 7005 of the and may be assessed and collected by establishing a safety zone for emergency
Families First Act), as modified by the Secretary in the same manner as the purposes for all waters of the Lower
section 3606 of the CARES Act, and the taxes. Mississippi River (LMR), extending
credits under section 2301 of the CARES from mile 660.0 to mile 663.0. This
(c) Advance credit amounts
Act can be assessed as an underpayment emergency safety zone is needed to
erroneously refunded. The
of the taxes imposed by section 3111(a) protect persons, property, and
determination of any amount of credits
include persons treated as the employer infrastructure from the potential safety
erroneously refunded as described in
under sections 3401(d), 3504, and 3511 hazards associated with the diving and
paragraphs (a) and (b) of this section
of the Code, consistent with their salvage effort of a sunken barge at
must take into account any amount of
liability for the section 3111(a) taxes Mississippi River Mile Marker (MM)
credits advanced to an employer under
against which the credit applied. 661.0, in the vicinity of the Helena
the process established by the Internal
(e) Applicability date. This regulation Highway Bridge, Helena, Arkansas.
Revenue Service in accordance with
applies to all credit refunds under Deviation from the safety zone is
sections 7001(b)(4)(A)(ii) and
sections 7001 and 7003 of the Families prohibited unless specifically
7003(b)(3)(B) of the Families First Act,
First Act (including any increases in authorized by the Captain of the Port
as modified by section 3606 of the
those credits under section 7005 of the Lower Mississippi River or a designated
CARES Act, and section 2301(l)(1) of the
Families First Act), as modified by representative.
CARES Act.
section 3606 of the CARES Act, DATES: This rule is effective without
(d) Third party payors. For purposes
advanced or paid on or after April 1, of this section, employers against whom actual notice from July 29, 2020 through
2020 and all credit refunds under an erroneous refund of the credits under August 30, 2020, or until all diving and
section 2301 of the CARES Act sections 7001 and 7003 of the Families salvage work is complete, whichever
advanced or paid on or after March 13, First Act, as modified by section 3606 occurs earlier. For the purposes of
2020. of the CARES Act, and the credits under enforcement, actual notice will be used
■ Par. 3.Section 31.3221–5T is added to
section 2301 of the CARES Act can be from July 13, 2020 through July 29,
read as follows: assessed as an underpayment of the 2020.
§ 31.3221–5T Recapture of credits under taxes imposed by section 3221(a) ADDRESSES: To view documents
the Families First Coronavirus Response include persons treated as the employer mentioned in this preamble as being
Act and the Coronavirus Aid, Relief, and under sections 3401(d), 3504, and 3511 available in the docket, go to https://
Economic Security Act. of the Code, consistent with their www.regulations.gov, type USCG–2020–
(a) Recapture of erroneously refunded liability for the section 3221(a) taxes 0408 in the ‘‘SEARCH’’ box and click
credits under the Families First against which the credit applied. ‘‘SEARCH.’’ Click on Open Docket
Coronavirus Response Act. Any amount (e) Applicability date. This regulation Folder on the line associated with this
of credits for qualified sick leave wages applies to all credit refunds under rule.
or qualified family leave wages under sections 7001 and 7003 of the Families FOR FURTHER INFORMATION CONTACT: If
sections 7001 and 7003, respectively, of First Act, as modified by section 3606 you have questions on this rule, call or
the Families First Coronavirus Response of the CARES Act, advanced or paid on email LT Adam J. Paz, U.S. Coast Guard;
Act (Families First Act), Public Law or after April 1, 2020, and all credit telephone 901–521–4825, email
116–127, 134 Stat. 178 (2020), as refunds under section 2301 of the adam.j.paz@uscg.mil.
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