Question #2:
How does an organization determine if it is considered an “instrumentality” of the Federal government, or of a State or local government, for purposes of the employee retention credit?
Found under the A. Eligible Employers section of the Employee Retention Credit (ERC) IRS Notice 2022-20 with updated guidance to help business owners follow the current ERC rules.
The answer to question #2, How does an organization determine if it is considered an “instrumentality” of the Federal government, or of a State or local government, for purposes of the employee retention credit?, can be found below.
ERC IRS Notice 2022-20 Question #2:
A. Eligible Employers
How does an organization determine if it is considered an “instrumentality” of the Federal government, or of a State or local government, for purposes of the employee retention credit?
In general, for employment tax purposes, the IRS considers six factors in determining whether an organization is a government instrumentality. The six factors that are used to determine whether an organization is an instrumentality are:
• 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;
• 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.
See 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.
For more information about the Employee Retention Credit (ERC) IRS Notice 2022-20, visit the Internal Revenue Service (IRS) Department of the Treasury, official IRS.gov tax website.
Conclusion and Summary on How does an organization determine if it is considered an “instrumentality” of the Federal government, or of a State or local government, for purposes of the employee retention credit? – #2 ERC IRS Notice 2022-20
The answer to Question #2: “How does an organization determine if it is considered an “instrumentality” of the Federal government, or of a State or local government, for purposes of the employee retention credit?” was answered in detail above. It was found under section “A. Eligible Employers” in IRS Notice 2022-20.
Leave a comment below if you have further questions on the Employee Retention Credit (ERC) or for clarifications on How does an organization determine if it is considered an “instrumentality” of the Federal government, or of a State or local government, for purposes of the employee retention credit?
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Cover Image Credit: Irs.gov / IRS Notice 2021-20 / Disaster Loan Advisors.
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