August 2, 2022

Art Galleries May Still Find Cash Relief from Employee Retention Credit

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Art galleries were significantly impacted during the pandemic. Many art galleries were initially closed due to governmental orders, only to reopen subject to debilitating capacity restrictions, social distancing procedures, and travel restrictions critical for many galleries’ sales. Unfortunately, many art galeries, including non-profits, incorrectly believe that they are ineligible for the very real opportunity to access significant cash relief in a refundable employee payroll tax credit—the Employee Retention Credit (ERC).

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With credits often exceeding the initial payroll tax liabilities themselves, the ERC has already awarded millions of dollars to a broad spectrum of employers, including galleries. And unlike the Paycheck Protection Program (PPP) loans and Shuttered Venue Operator Grants, the ERC was never limited by available federal funds, so any business that qualifies and applies can still find ERC relief! 

Launched in March 2020, the ERC remains one of the biggest relief opportunities—up to $26,000 per employee during 2020 and 2021—available to businesses that have been negatively impacted by the COVID-19 pandemic. And even for those galleries already beginning to recover, employers can retroactively claim the ERC based on hardships experienced during 2020 and the first three quarters of 2021.

Employers should also remember: (1) that the ERC is available even if they already received Paycheck Protection Program (PPP) loans or Shuttered Venue Operator Grants, and (2) businesses that started up after February 2020 may qualify under specific ERC provisions that can provide up to $100,000 in refundable credits in 2021. 

ERC Eligibility

One way for art galleries to establish ERC eligibility is by showing that the business suffered a reduction in gross receipts. 

  1. Tax Year 2021 (Quarters 1, 2, and 3):
Employer is eligible if business’s gross receipts are more than 20% down from the gross receipts in the same calendar quarter of 2019.
  1. Tax Year 2020 (Quarters 1 through 4):
Employer is eligible if business’s gross receipts are more than 50% down from the gross receipts in the same calendar quarter of 2019.

Galleries may also be eligible due to government orders which restricted their operations. 

Commons examples include, but are not limited to:

  • Prohibited art fairs, and other physical events 
  • Partial and/or complete closures of viewing rooms
  • Capacity limitations applicable to public and private spaces which caused cancellations of a variety of pre-planned events
  • A state or local order requiring employees to work remotely
  • Mandated, time-consuming sanitization procedures

*Note that orders creating qualifying partial suspensions were more common than many employers and tax practitioners realize.

Conclusion

Whether or not Congress replenishes other forms of pandemic related relief for art galleries, the ERC remains available now. Numerous government orders restricted a broad range of ordinary business operations in the industry—and you may be one of many employers entitled to substantial cash benefits. If you operate an art gallery, don’t wait to find out if you qualify! Contact our team today at (410) 497-5947 or schedule a consultation.

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