Top 5 Things Dairies Need to Know about the Employee Retention Credit

Guest Column By Alliant Group Staff

While dairy farmers have adapted well to the market and economic disruptions over the last two years, there continue to be significant challenges in the industry.  Inflation has increased the price of feed and other inputs and the worker shortage has affected almost every operation.  The Employee Retention Credit (ERC) is a powerful federal incentive meant to offset issues such as these but there is some uncertainty in our community about how the credit works. Here are the five things every dairy needs to know about ERC.

Is this real?

  • Many of the dairies we’ve talked to have been surprised that the government is offering a program that is providing six figure refunds, but it’s true. Congress’ intent with the ERC was to return taxpayers’ money to them so they could use it to keep workers employed, hire more, and to offset the costs of the pandemic. You can see its codification for yourself in Section 2301 of the CARES act and its expansion in the Consolidated Appropriations Act, 2021.

What makes me eligible?

  • There have been a lot of dairy operations that have looked into the credit but there has been some misinformation on how you qualify.
  • First, there are actually two separate ways to qualify. The first, is if your business had a decline in revenue. The second, is if you had a documentable impact to your business due to COVID related government orders.
  • The second qualifying pathway is the one where there is the most confusion. Impacts to your business can mean lots of things, but it does not mean that you were unable to find a specific part for your tractor; it needs to be a more substantive. Example qualifying events can include dumping milk, adjusting rations due to feed availability, and supply chain delays such as vaccine availability. CDI has given its dairymen a head start towards qualifying by working with alliantgroup to build out all of the logistical and operational challenges caused by COVID at the processor. These challenges can also help dairymen claim this credit. If you are unsure, reach out to a tax incentive expert.
  • The second pathway also requires a relevant government order. Just because there was a shelter in place order does not automatically qualify you. If that order impacted your operations, however, then it very well could qualify your business.

Does this credit only apply to the costs of employing workers on my dairy?

  • A lot of dairies have asked if this is only for dairy employees. The answer is no, any W2 employees you have on staff are eligible.

Does being a CDI member expand your eligibility?

  • Being a member of CDI potentially expands your eligibility because of each member farms’ reliance on the CDI network. Since there are shared components to the co-op, such as marketing and processing, impacts to those components can potentially qualify your business.

How do I do this the right way?

  • There have been a lot of here-today-gone-tomorrow firms that have been reaching out to CDI members. These firms have not been transparent about their process and only tell you what number to put on your tax forms. Claiming the credit requires considerable documentation and substantiation of qualifying impacts at an employee-by-employee level and the relation of those impacts to a relevant government mandate. Your ERC provider should be providing you with full documentation of their findings to go along with your filing.

You may still have questions, but I encourage every dairy operation to take a look at this benefit. It is best that you reach out to a qualified incentive expert to walk you through the specific circumstances that your operation has been through over the past couple of years. Even if you think you do not qualify, you may be surprised how expansive the new regulations have been and you could find that you can get a substantial amount of money back on taxes you already paid.