Title 26 › Subtitle C — Employment Taxes › CHAPTER 21 — FEDERAL INSURANCE CONTRIBUTIONS ACT › Subchapter D — Credits › § 3134
Employers may claim a tax credit equal to 70% of the “qualified wages” they pay each calendar quarter. The wages counted for each employee are limited to $10,000 per quarter (so the most credit per employee is $7,000 per quarter). Recovery startup businesses have an extra cap: their credit per quarter cannot be more than $50,000. The credit cannot be larger than the employer’s applicable payroll taxes for that quarter, but any amount above that limit is treated as an overpayment and can be refunded. The credit only applies to wages paid after June 30, 2021 and before October 1, 2021 (for recovery startup businesses, before January 1, 2022). Short definitions and key rules: “Applicable employment taxes” means certain employer payroll taxes. An “eligible employer” is one that was operating and either had to close or partly close under COVID‑19 orders, had gross receipts under 80% of the same quarter in 2019 (or 2020 if not in existence in 2019), or is a recovery startup. “Qualified wages” depend on employer size: employers with more than 500 full‑time workers in 2019 can count wages paid to employees who are not working; employers with 500 or fewer can count wages paid during the suspension or decline quarter. Employers with a gross‑receipts drop below 10% are treated as “severely financially distressed” and may count all wages. Wages include certain employer‑paid group health plan amounts. Government employers are generally excluded, with specific nonprofit, college, and medical exceptions. Wages already counted for certain other credits or for covered loan/grant payroll forgiveness cannot be used here. Small employers (those with 500 or fewer full‑time employees in 2019) may elect to get an advance payment based on 70% of their 2019 average quarterly wages, but they must reconcile and repay any excess. The Treasury will issue forms and rules, and the time for audits related to this credit is extended to 6 years.
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Internal Revenue Code, Source: USLM XML via OLRC
Legislative History
Reference
Citation
26 U.S.C. § 3134
Title 26, Internal Revenue Code
Last Updated
Sep 22, 2026
Release point: 119-110