Are you a federal, state, or local entity?
The federal government, the governments of any state or political subdivision thereof, and any agency or instrumentality of those governments are not Eligible Employers and are not entitled to receive the Employee Retention Credit. However, tribal governments and tribal entities may be Eligible Employers.
In general, for employment tax purposes, the IRS considers six factors in determining whether an organization is an instrumentality entity:
- whether the organization is used for a governmental purpose and performs a governmental function;
- whether performance of the organization’s function is on behalf of one or more States or political subdivisions;
- whether there are any private interests involved, or whether the States or political subdivisions involved have the powers and interests of an owner;
- whether control and supervision of the organization is vested in a public authority or authorities;
- if express or implied statutory or other authority is necessary for the creation and/or use of such an instrumentality, and whether such authority exists; and
- the degree of financial autonomy and the source of its operating expenses.
Are tax-exempt employers eligible for the Employee Retention Credit?
Yes, organizations described in section 501(c) of the Internal Revenue Code (the “Code”), and exempt from tax under section 501(a) of the Code, may be Eligible Employers for purposes of the Employee Retention Credit if they are employers that otherwise meet the requirements to be eligible for the credit.
Are tribal governments and tribal entities eligible for the Employee Retention Credit?
Yes. Any tribal government or tribal entity that carries on a trade or business may be an Eligible Employer for purposes of the Employee Retention Credit, if it otherwise meets the requirements for the credit.