Tax considerations concerning R&D Tax Credit, PPP Loans and Employee Retention Credit

When considering the impact of utilizing the ERC and having PPP loans forgiven, understanding the interplay between the two as well as with the Research and Development (“R&D”) tax credit is vital to complying with the guidance and maximizing a company’s tax savings. For the 2021 tax year:

• ERC and PPP:  Wages included in a PPP Loan that was forgiven cannot be used to calculate ERC
• ERC and R&D:  Wages used to calculate a company’s ERC must be excluded from the computation of its R&D tax credit
• PPP and R&D: No effect on one another 

Mazars’ insight

When a taxpayer intends to claim both the ERC and the R&D Tax Credit, evaluate the impact one credit has on the computation of the other. Further analysis should also be conducted around the wages used to achieve PPP Loan forgiveness and its impact on either computation. Though all three can be utilized in conjunction in the 2021 tax year, certain wage amounts will need to be excluded to appropriately adhere to the latest regulations.

Mazars will continue to monitor all developments related to these tax incentives.

Please contact your Mazars professional for additional information. 

Authors

Ryan Vaughan, Partner 
Norman Neely, Manager 

The information provided here is for general guidance only, and does not constitute the provision of tax advice, accounting services, investment advice, legal advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers.