Bipartisan Budget Act Expands Disaster Zone Employee Retention Credits to California Wildfires

• The Bipartisan Budget Act of 2018 allows employers affected by the California wildfires during 2017 to claim an employee retention credit.
• Eligible employers could be entitled up to a $2,400 credit for each employee retained during the wildfires, for the period dates described in the act.
• The IRS is directing impacted taxpayers to complete Form 5884-A to claim the credit and attach it to their corporate return.

California businesses that retained staff during the wildfires of 2017 could be entitled to a credit as much as $2,400 per employee.

The Bipartisan Budget Act of 2018, signed into law on Feb. 9, 2018, allows eligible employers affected by the 2017 California wildfires to claim an employee retention credit. Victims of the events that took place beginning after Dec. 3, 2017 in parts of California may qualify for tax relief from the Internal Revenue Service (IRS).

The Employee Retention Credit applies to qualifying businesses that:

• Have locations in designated California wildfires disaster zones;
• Had trade or business that became inoperable between Oct. 8, 2017 and Jan.1, 2018; and
• Continued to pay their employees even as the calamities disrupted their operations. 

Eligible employees (working for eligible employers) are those whose principal place of employment on Oct. 8, 2017, was in the California wildfires disaster zone.

Guidance for claiming employee retention credits

The IRS extended deadlines for certain taxpayers who were affected by the California wildfires, flooding, mudflows, and debris flows in regards to filing returns, paying taxes, and certain other time-sensitive acts. Affected California taxpayers had until April 30, 2018. However, the agency has not specified a due date for claiming employee retention credits. The IRS directs affected taxpayers to complete Form 5884-A to claim the credit and attach it to their corporate returns.

IRS assistance is available

IRS Publication 976, Disaster Relief, explains special tax law provisions for those affected by the California wildfires. Employers can get answers to wildfire-related questions by calling the toll-free IRS disaster hotline at 1-866-562-5227.