The IRS released new guidance for federal credit unions as to their ability to claim the Employee Retention Credit under Section 2301 of the CARES Act. According to the Office of Chief Counsel for the IRS, federal credit unions are not eligible to claim the credit for wages paid either before January 1, 2021 or after March 12, 2020. However, federal credit unions may, subject to eligibility requirements, claim the credit for wages paid after December 31, 2020, and before July 1, 2021. Additionally, under Section 3134 of the Internal Revenue Code, federal credit unions may claim credits for wages paid after June 30, 2021, and before October 1, 2021. Additionally, if the federal credit union qualifies as a recovery startup business, then the cut-off is extended to wages paid through December 31, 2021.
The employee retention relief credit was established under the CARES Act of 2020. The Act allows a tax credit against certain employment taxes in certain circumstances. The Act contains a provision that excluded the federal government, state government, and “any agency or instrumentality of any of the foregoing” from claiming the credit. In a legal memorandum from July 18, 2023, the Office of Chief Counsel noted that federal credit unions are not eligible for the employee retention credit for wages paid after March 12, 2020, and before January 1, 2021, because they are considered “instrumentalities of the federal government.” However, federal credit unions are eligible for credit on wages paid in the subsequent periods because they’re eligible under other parts of the Internal Revenue Code.