February 2018 – Additional Business Tax Credit for Hurricane Harvey Victims

During 2017, many of our clients were affected by Hurricane Harvey, and we sincerely hope business will recover soon. As your CPA, we can help you to maximize the tax benefits related to claiming disaster loss. In addition to reporting regular business loss, your company might be able to claim an extra tax credit if the business was rendered inoperable by Hurricane Harvey.

On September 29, 2017, the Disaster Tax Relief and Airport and Airway Extension Act of 2017 was signed into law, creating an employee retention credit for employers affected by Hurricanes Harvey, Irma, and Maria (the HDZ Employee Retention Credit). To be eligible for the tax credit, the employer must have actively conducted a trade or business on the hurricane date (August 23, 2017 for Harvey) within the designated disaster zone and become inoperable during the applicable relief period, as a result of hurricane damage.

The HDZ Employee Retention Credit is based on qualified wages paid by an eligible employer to an eligible employee. For this purpose, an “eligible employee” is an employee whose principal place of employment on the applicable hurricane date was in a designated disaster zone; and “qualified wages” are wages paid to an eligible employee during the relief period in which the business first became inoperable until it resumed significant operations. Qualified wages include wages paid without regard to whether the employee performed any services during the relief period, and without regard to whether the employee performed services at the principal place of employment or at a different location prior to when the employer resumed significant operations.

The credit amount is equal to forty percent (40%) of the qualified wages paid to each eligible employee, up to $6,000 (making the maximum credit $2,400 per eligible employee). This credit can be applied to C Corporations, S Corporations and Partnerships if they meet the requirements.

As of the time of this article the IRS guidance is pending; a delay in filing the 2017 tax return could prove necessary if claiming the credit. If you have further questions, please consult your CPA.