How does the ERC apply to government-related entities like CVBs and DMOs?
While the COVID-19 pandemic impacted nearly every area of life in the United States (and across the globe), there were a few industries where normal business operations were almost entirely stopped. Outside of healthcare, perhaps no industry was more seriously affected than travel and hospitality.
Convention and Visitors Bureaus (CVBs) and Destination Marketing Organizations (DMOs) felt the economic and operational pressures of the pandemic keenly. As not-for-profit organizations primarily funded by hotel occupancy taxes through their local government, CVBs and DMOs exist to strengthen the economic development of their regions through tourism, event planning, and convention sales. By promoting options for meetings, conventions, and other gatherings, these organizations increase revenue and public interest in their areas.
Because CVBs and DMOs are meant to drive travel and hospitality revenue, naturally government shutdown orders and other measures had a huge impact on both their operational ability and their bottom line. Between social distancing requirements, more stringent cleaning procedures, and the rise of remote work and virtual conference options, these organizations were severely impacted by the COVID-19 pandemic.
Since these organizations are often primarily but not wholly funded by their local governments, they fall into a gray area known as “government-related entities.” So – for the purposes of the employee retention credit – how does a CVB or DMO determine if it is considered an “instrumentality” of the Federal, state, or local government?
The IRS uses six factors used to determine if an organization is a “government instrumentality.” These factors include:
- 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; 19
- •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.
According to IRS Rev. Rul. 57-128, 1957-1 C.B. 311. “No one factor is determinative; instrumentality status is based on all the facts and circumstances. These same factors apply to identify an instrumentality of the Federal government, or of a State or local government, for purposes of the employee retention credit.”
Is my business eligible for the ERC?
It’s vital to know if your business qualifies for the ERC. Otherwise, you’re leaving up to $26,000 per payroll employee on the table.
But this is a highly specialized area of tax law, so it can be difficult to determine eligibility even for CPAs. And if you do qualify – then what? Understanding the process is imperative.
That’s where ERC Provider excels.
We’ve helped clients across the country figure it out. Many of our clients are referred to us by their own CPAs, who recognize that this is a niche. We are tax experts solely focused on the ERC.
If you complete our evaluation form and our analysis shows that you qualify, we simplify a complex process. We walk you through what you need for payroll information and 941 forms so we can calculate your credit, and we pair you with one of our specialists to prepare the paperwork and finalize the details.
And just like that, you’re done! Easy, right?
