CLARIFICATIONS AND TECHNICAL IMPROVEMENTS TO CARES ACT EMPLOYEE RETENTION CREDIT.

SEC. 206. CLARIFICATIONS AND TECHNICAL IMPROVEMENTS TO CARES ACT EMPLOYEE RETENTION CREDIT. (a) Gross Receipts of Tax-exempt Organizations.—Section 2301(c)(2)(C) of the CARES Act is amended— (1) by striking “of such Code, clauses (i) and (ii)(I)” and inserting“of such Code— “(i) clauses (i) and (ii)(I)” , (2) by striking the period at the end and inserting “, and”, and (3) by adding at the end the following new clause: “(ii) any reference in this section to gross receipts shall be treated as a reference to gross receipts within the meaning of section 6033 of such Code.” . (b) Modification of Treatment of Health Plan Expenses.—Section 2301(c) of the CARES Act is amended— (1) by striking subparagraph (C) of paragraph (3), and (2) in paragraph (5)— (A) by striking “The term” and inserting the following: “(A) In general.—The term” , and (B) by adding at the end the following new subparagraph: “(B) Allowance for certain health plan expenses.— “(i) In general.—Such term shall include amounts paid by the eligible employer to provide and maintain a group health plan (as defined in section 5000(b)(1) of the Internal Revenue Code of 1986), but only to the extent that such amounts are excluded from the gross income of employees by reason of section 106(a) of such Code. “(ii) Allocation rules.—For purposes of this section, amounts treated as wages under clause (i) shall be treated as paid with respect to any employee (and with respect to any period) to the extent that such amounts are properly allocable to such employee (and to such period) in such manner as the Secretary may prescribe. Except as otherwise provided by the Secretary, such allocation shall be treated as properly made if made on the basis of being pro rata among periods of coverage.” . (c) Improved Coordination Between Paycheck Protection Program and Employee Retention Tax Credit.— (1) [15 U.S.C. 636m] Amendment to paycheck protection program.—Section 7A(a)(12) of the Small Business Act, as redesignated, transferred, and amended by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, is amended by adding at the end the following: “Such payroll costs shall not include qualified wages taken into account in determining the credit allowed under section 2301 of the CARES Act or qualified wages taken into account in determining the credit allowed under subsection (a) or (d) of section 303 of the Taxpayer Certainty and Disaster Relief Act of 2020.”. (2) Amendments to employee retention tax credit.— (A) In general.—Section 2301(g) of the CARES Act is amended to read as follows: “(g) Election to Not Take Certain Wages Into Account.— “(1) In general.—This section shall not apply to so much of the qualified wages paid by an eligible employer as such employer elects (at such time and in such manner as the Secretary may prescribe) to not take into account for purposes of this section. “(2) Coordination with paycheck protection program.—The Secretary, in consultation with the Administrator of the Small Business Administration, shall issue guidance providing that payroll costs paid during the covered period shall not fail to be treated as qualified wages under this section by reason of an election under paragraph (1) to the extent that a covered loan of the eligible employer is not forgiven by reason of a decision under section 7A(g) of the Small Business Act. Terms used in the preceding sentence which are also used in section 7A of the Small Business Act shall have the same meaning as when used in such section.” . (B) Conforming amendments.— (i) Section 2301 of the CARES Act is amended by striking subsection (j). (ii) Section 2301(l) of the CARES Act is amended by striking paragraph (3) and by redesignating paragraphs (4) and (5) as paragraphs (3) and (4), respectively. (d) Regulations and Guidance.—Section 2301(l) of the CARES Act, as amended by subsection (c)(2)(B)(ii), is amended by striking “and” at the end of paragraph (3), by striking the period at the end of paragraph (4) and inserting “, and”, and by adding at the end the following new paragraph: “(5) to prevent the avoidance of the purposes of the limitations under this section, including through the leaseback of employees.” . (e) [26 U.S.C. 3111 note] Effective Date.— (1) In general.—The amendments made by this section shall take effect as if included in the provisions of the CARES Act to which they relate. (2) Special rule.— (A) In general.—For purposes of section 2301 of the CARES Act, an employer who has filed a return of tax with respect to applicable employment taxes (as defined in section 2301(c)(1) of division A of such Act) before the date of the enactment of this Act may elect (in such manner as the Secretary of the Treasury (or the Secretary’s delegate) shall prescribe) to treat any applicable amount as an amount paid in the calendar quarter which includes the date of the enactment of this Act. (B) Applicable amount.—For purposes of subparagraph (A), the term “applicable amount” means the amount of wages which— (i) are— (I) described in section 2301(c)(5)(B) of the CARES Act, as added by the amendments made by subsection (b), or (II) permitted to be treated as qualified wages under guidance issued pursuant to section 2301(g)(2) of the CARES Act (as added by subsection (c)), and (ii) were— (I) paid in a calendar quarter beginning after December 31, 2019, and before October 1, 2020, and (II) not taken into account by the taxpayer in calculating the credit allowed under section 2301(a) of division A of such Act for such calendar quarter.