ERC Aggregation and Attribution Tool
Navigate the complex area of
aggregated and attributed ownership with the below resources!
How can "aggregated ownership" affect my business?
Aggregation rules mandate that members of a controlled group must calculate the Employee Retention Credit (ERC) as a single employer in accordance with the provisions of Section 2301(d) of the CARES Act.
These rules are crucial in determining: a) the number of Full-Time Employees within the controlled group, b) whether the employer experienced a Significant Decline in Gross Receipts (“SDGR) c) whether there was a Full or Partial Suspension of Operations (“FPSO”).
How can "attributed ownership" affect my business?
Attributed ownership rules play a critical role in a) identifying who is considered a majority owner of the business and b) determining who is considered an “eligible employee.”
To determine the ownership percentages in a business, IRS Section 1563 must be taken into account. § 1563 states that subject to specific circumstances an individual can be considered a larger shareholder in a business than the actual ownership interest he owns dependent on his relative’s ownership.
Not all relatives – Relatives that can play a role are spouse, children and parents (step and half blood relatives count as actual relatives). Click below for access to our attribution tool and determine what percentage owner you are.
Entities in the same "controlled group" due to common ownership = IRS Sections 52a / 52b
Section 2301(d) of the CARES Act provides that all persons treated as a single employer under Section 52(a) or (b) are treated as one employer for purposes of the credit. All entities that are members of a controlled group of corporations or trades or businesses under common control under sections 52(a) or (b) of the Code, are treated as a single employer for purposes of applying the employee retention credit. As a result, employers required to be aggregated are treated as a single employer for purposes of the following rules applicable to the employee retention credit:
- Determining whether the employer has a trade or business operation that was fully or partially suspended due to orders related to COVID-19 from an appropriate governmental authority;
- Determining whether the employer experiences a significant decline in gross receipts;
- Determining whether the employer averaged more than 100 full-time employees; and
- Determining the maximum credit amount per employee.
Click below to determine if your business is subject to the aggregation guidelines as described in section 52(a) and 52(b) by the IRS
Further entities part of the controlled group due to management function or ASG's = IRS Section 414m
Section 2301(d) of the Act provides that all persons treated as a single employer under Section 414(m) of the Code, or otherwise aggregated under section 414(o) of the Code are treated as one employer for purposes of the credit.
Entities that are subject to 414(m) and 414(o) are either
- Management entities who a large portion of their gross receipts are received from one aggregated employer or, ‘
- Affiliated service groups – Businesses who either service one another or who service clients in conjunction with each other
All entities that are members of a controlled group of corporations or trades or businesses under common control under sections 414(m) of the Code, or otherwise aggregated under section 414(o) of the Code, are treated as a single employer for purposes of applying the employee retention credit. As a result, employers required to be aggregated are treated as a single employer for purposes of the following rules applicable to the employee retention credit:
- Determining whether the employer has a trade or business operation that was fully or partially suspended due to orders related to COVID-19 from an appropriate governmental authority;
- Determining whether the employer experiences a significant decline in gross receipts;
- Determining whether the employer averaged more than 100 full-time employees; and
- Determining the maximum credit amount per employee.
Click below to determine if your business is subject to the aggregation guidelines as described by section 414(m) in the IRS
Disqualified employees wages due to being related to an owner = IRS Section 267c
Wages paid to related individuals, as defined by section 51(i)(1) of the Internal Revenue Code (the “Code”), are not taken into account for purposes of the Employee Retention Credit. A related individual is any employee who has of any of the following relationships to the employee’s employer who is an individual:
- A child, stepchild or a descendant of a child;
- A brother, sister, half brother, half sister, stepbrother, or stepsister;
- The father or mother, or an ancestor of either;
- A stepfather or stepmother;
- A niece or nephew;
- An aunt or uncle;
- A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.
In addition, if the Eligible Employer is a corporation, then a related individual is any person that bears a relationship described above with an individual owning, directly or indirectly, more than 50 percent in value of the outstanding stock of the corporation.
If the Eligible Employer is an entity other than a corporation, then a related individual is any person that bears a relationship described above with an individual owning, directly or indirectly, more than 50 percent of the capital and profits interests in the entity.
If the Eligible Employer is an estate or trust, then a related individual includes a grantor, beneficiary, or fiduciary of the estate or trust, or any person that bears a relationship described above with an individual who is a grantor, beneficiary, or fiduciary of the estate or trust.
