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3/2/2023
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Yes, local government municipalities that have a total of fewer than 500 employees are eligible for the Employee Retention Credit (ERC) under certain conditions.
The ERC is a refundable tax credit designed to encourage businesses to keep employees on their payroll during the COVID-19 pandemic. It is available to eligible employers who experienced a significant decline in gross receipts or were fully or partially suspended due to government orders.
According to the Consolidated Appropriations Act, 2021, local government municipalities are eligible for the ERC if they are a "tax-exempt organization or government entity" that is not a small business concern. The Act defines a small business concern as a business that has fewer than 500 employees, taking into account all employees within the controlled group of corporations, partnerships, and other entities under common control.
Therefore, if a local government municipality has fewer than 500 employees, they may be eligible for the ERC, subject to other eligibility requirements such as a significant decline in gross receipts or suspension of operations.
Here is the link to the full text of the Consolidated Appropriations Act, 2021: https://www.congress.gov/bill/116th-congress/house-bill/133/text
For more information about the ERC and eligibility requirements, you may want to consult the IRS website at https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act.
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