 So glad you're here. It's another episode of the non-profit show and really glad to be having this conversation with our guest, Liz Pearson, Economic Incentives Advisory Group. And she's here to share with you about the employment retention credit, or we are going to refer to it also as ERC for non-profits. So before we jump into this very sexy conversation, Liz, I wanna make sure our viewers and listeners know who we are or we can remind them who we are. Julia Patrick, great to see you. Julie is the CEO of the American Non-profit Academy and I'm Jarrett Ransom, her trusty sidekick and personal non-profit nerd, but I can be yours too. CEO of the Raven Group and nerd out over these conversations. It feels like 24 seven, but anyway, really glad to have these conversations thanks to the support of our presenting sponsors. So a huge shout out of gratitude goes to our friends over at Blumerang, American Non-profit Academy, fundraising academy at National University, non-profit thought leader, your part-time controller, staffing boutique, as well as non-profit nerd. These companies are here for your mission. I really like to remind everyone that their mission is actually your mission. So they're here to help you elevate and do more good in and around and throughout your community. They've also helped us to produce over 700 episodes on which you can find them on Roku, Amazon Fire TV, Vimeo, YouTube, as well as podcasts. So for those of you that are podcast listeners, you can queue us up there as well and you will get the automatic updates if you subscribe to that. So again, today's conversation, we have heard this a lot, I feel over the last three, four-ish years, but there's been a lot of changes. And so we've brought on Liz Pearson to nerd out with us at such a great level that's gonna really help you better educate and inform. So Liz, you're joining us from Economic Incentives Advisory Group. I want to formally welcome you and also ask that you share a little bit about what is this group and what are like kind of, you provide a lot of different services, what are those? All right, well, thank you, nice to see everyone. Yes, we have a long complicated name but it's exactly what we do. Economic incentives and we are advisors. So it's government tax incentives and other business incentives that are offered to both for-profit and nonprofit businesses. And there are so many of them out there that often go unclaimed and we help businesses as large as SpaceX take advantage of them down to, I have some two-person nonprofits that I'm helping out. So we want to help businesses of all sizes take advantage of what's being offered. Wow, it's so interesting because if you think about where we started with COVID, I always thought of government engagement on these things as being limited to the tech sector, agriculture, education, science. Never ever knowing that any of this was going on and then how it just exploded during COVID and especially for a nonprofit, as Jared was mentioning in the green room, this kept so many of our organizations in the game. I mean, just flat out in the game. And so it's- Is that their doors open? Yeah, I mean, it has really changed my perception on how some of these things work and what it looks like. So let's start off and have you even just explained to us what the federal ERC credit is. Absolutely. All right, so the employee retention credit was actually introduced at the same time as the PPP loans as part of the COVID relief program. But initially when it came out, businesses had to choose between the PPP loans and the employee retention credit. And those PPP loans, people could get them quickly. They were just trying to get the money out the door to businesses. And then after the fact, they had to go back and the loans had to be forgiven, obviously. So then there were changes to the CARES Act, which allowed businesses to take advantage of both programs. So that's why all of a sudden there was this kind of flood of information and encouraging people to take advantage of this credit. So that's a little bit of how the two programs came to be. So I think the name is a little bit deceiving and employee retention credit, that was the goal. So the PPP loans were very specific about what the money could be used for. And then you go through the forgiveness process. So this employee retention credit, really it's a payroll tax credit, we like to say, plus an additional amount. So it's not specifically just the amount that you pay in your payroll taxes because it's offering up to $26,000 per employee. It's clearly more than anybody paid in their payroll taxes. One of the great things about this is that the money that is received can be used however your business would like to use it. It's unencumbered, which is really nice. It's not like a grant that's for something specific can be used within your business. You don't have to report back to the IRS and tell them, we used it on this and we used it on that and whatnot. And there's no time period in which the money has to be spent. Oh, interesting. Now I'm curious and I wanna ask some of those questions that maybe our viewers and listeners are saying like, I might be too embarrassed to ask this. Has the ERC been around like for ages or did this come up literally for the CARES Act for the COVID-19 pandemic? It is specifically part of the CARES Act. So the program actually ran, it started when COVID started. So the program is looked at when we're writing these calculations on a quarterly basis. So Q234 of 2020 and then it ran Q123 of 2021. So initially it went through Q4 of 2021 and then that was rescinded. That was one of the changes. So now the program technically ended the end of September of 2021. So the IRS has given what they're calling a three year look back that businesses can go back and claim the credit. So we are in that look back period. Interesting. And there's so many changes to this. Fascinating. And there's recently some of the confusion has been on the deadline of when businesses can take advantage of this. So I'll take a real quick minute to clarify that. So initially the understanding is that they said three years. So that meant the first quarter that could have been claimed, was Q2 of 2020. So therefore, that quarter should end at the end of Q2 of 2023. But that's not the case. What's happening is the first deadline when this program, for this program is August 15th of 2024. At that point, after that point you can no longer claim all three quarters of 2020. So that's when the credit for 2020 ends. And then you have a whole other year till, did I say August? I'm in April. April. April. Yeah, April. Sorry, April. Okay. April 15th, tax day. And then you have a whole other year to April 15th of 2025 to claim all of 2021. So as much as we want to encourage people to really get on this because this is a long process for dealing with the IRS to get it in, that we really do still have some runway with people to help them claim credit. That is so fascinating. Cause I have been feeling like, all of that relief funding is gone. It's been spoken for or the window has closed. But yeah, my mind is blown by this Liz. And I know you have helped so many organizations for profit and not for profit, right? For your company? Right. And it really is something where, what we were coming up against at first is it just sounded too good to be true. So people kind of, they didn't want to talk to us cause they're like, and now we're sort of like, oh, there's so much noise. Like you said, I don't even want to talk about it. But I mean, businesses really should look at it. And I think the most important thing is it's important to look at it to get the money. It's also important to look at to know, hey, I'm not leaving the money behind because of our businesses that I speak to that I say, you know, you actually don't qualify and they say, okay, no problem. I'm glad to know I didn't just leave $500,000 on the table for my business. Right. Liz, talk to us about how this might be different if you are a nonprofit. Because again, with our viewers, I mean, we are the nonprofit show. Are there things that are gonna be different for us in this sector for the 501C3s? I would say yes and no, technically, not at all. Everybody, you know, whether you're for-profit or nonprofit, you can qualify for the business. Now, what I found working with nonprofits is there are two ways to qualify for this program. And the first way and the most obvious way is a decrease in gross receipts. But a lot of nonprofits actually didn't experience that. And so sometimes they will either count themselves out or their accountant said, oh, I can just run this real quick for you. And if they don't see that decrease in gross receipts, they just say, you know, you won't qualify for the program. So that's, you know, I think that's where our level of expertise and our years of experience come into play that there is a second way to qualify, which is changes to your business operations and every nonprofit experiences changes to business operations. And you really, you know, meet the expertise to understand these changes of business operations that have to be specifically lined up with a COVID mandate. And we have to marry those two things in order for the IRS to say, okay, that was a good argument. We are willing to put this through. Right, wow, that is fascinating. Talk to us a little bit about this in connection to the PPP funding. I mean, early in the days of the nonprofit show, we literally would have episodes where we were live and we were watching the votes in Congress come in and reporting on it. And it was such a challenging time and challenging concept. And when we had COVID, we had the actual things that were realities to our lives, but then we had these conceptual issues and we were trying to use your word, marry the two. Talk to us about how this PPP funding factors in. Sure, yep. It's really important for businesses to understand that just cause that, you know, they took one, they certainly can take the other and how they interact. So both programs could be used toward payroll. So what ends up happening, and this is a little technical, but it's the best way to explain it is when we're looking, we look at each quarter. So once we've been able to qualify your business for a quarter, we say, did you use any PPP funding to cover any of your payroll in that quarter? And so to give you an example, if an employee had $15,000 worth of payroll, but 10,000 of it was covered by PPP loans, then we just, we subtract out that 10,000 and we run our calculation for that quarter only based on the $5,000 worth of payroll. So basically it just gets subtracted out and then we can keep going. Wow. So it's really a simple calculation on our end. So when we are gathering information, it's really important for us, we ask, how much did you receive? How much was used for payroll? What were the dates that you used it and was it forgiven? So I'm really curious, Liz, what is the process for our viewers and listeners that are saying, okay, I heard we still have time for this. And if this is something that perhaps we've procrastinated on or as I mentioned earlier, there's so much noise out there, like how do we know what to listen to and who to listen from? Like what is the process for this? And I know you specialize in this and I'd love for you to share that process. Sure, I'm gonna answer that question in two parts. So one being, how do you kind of pick a provider? How do you decide? So just to give you a little bit of background about our company. So we've been in business for over 23 years specifically doing tax credits and incentives. So we have many years of experience knowing how to process these through the IRS. And so what I like to say is that it was important that we were here before the ERC and equally important that we're gonna be here after the ERC because the IRS has a five year period of look back that they can come back and audit. And if they do that, we will be here to support that audit at no additional fees. So we're gonna be around for that. That's it. I think that's one of the most important thing is longevity in this field. We are not a branch of a larger company. This is just what we do. We're kind of a very specialized firm. We do, we consult with a former IRS attorney on anything that we have questions about some of these harder cases that we're trying to put through cyber security is very important because we're asking about some, your 941 payroll tax forms you're sending to us, insurance, so things like that are very important. So when, if you're speaking to trying to choose a provider those are some of the questions that you wanna ask. So the second question is the process. The process is just this. We have a conversation about it. It's usually a pretty quick one. Depending on how much information you want from me, I ask you a few questions about your business. I'll say, did you have a decrease in revenue? Do you think you did? And if they say, no, probably not. We think they had an increase. Then we talk about some of their changes to business operations. So I can give people some ideas of, yeah, why don't you put that down, put that down. So we then send them what we call pre-qualification form and it's really just three pages. It asks general information about your business, PPP loans, gross receipts, number of employees. And then we ask about your changes to business operations. So we say, again, it depends. That's gonna take you a couple of hours, sometimes a little bit longer depending on how much you're getting into your business operation changes. And obviously our service agreement. Once I received those two documents, we send them to our processing department and those are the real experts. So the head of our processing department really looks through there and she ranges a phone call usually within five days with our clients. And she says, okay, so I really think that this is where I'm gonna be able to qualify you. You said these two things and now I need you to send me some sort of documentation. So she drills down and really tries to get the backup because she knows, okay, if I can get this backup from you, this is where some more money is gonna come in. So once we go all the way through that process and she gets all the information she needs, it takes them about five weeks to run the calculation. She asks for the 941 payroll forms at that time and they go and they calculate each individual employee, whether it's five employees or 300 employees. They come back to you and say, this is the amount that we expect you can get. We do sign off as the preparer of the 941 X payroll forms and they're submitted and then it's time to wait. Time to wait. How long is that wait? How long? That's the question, right? So on some of the smaller ones, it's about four months. Some of the bigger ones, it's gonna take longer than that but our goal up front is to provide good information because if your claim's gonna be, we're saying over a million dollars, the IRS could take a close look at it and we're prepared for that. So that can take six months maybe longer. It's important to know that these come in paper checks. This isn't just gonna be a credit put towards payroll taxes. You gotta look out for a check coming in the mail and the checks can come, different checks for different quarters and whatnot. So that's a little bit of a process. Are so many moving pieces. Honestly, for me, Liz, it's like, I would absolutely hand this over to an expert to say, hey, this is your jam. This is what you focus on. I can only imagine so many organizations right now are thinking, hey, there's still time in this window especially from what you've said because I still hear Julia, there are organizations that say we have enough money to take us till August or we have enough money for 12 more months. And really looking at the recovery of the impact. So this is so very important. Gosh, I just, yeah, there's so much to share. You know, Liz, I love that you walked us through the process because that really put a framework to this whole thing. Let's talk about the talent. Who would you be normally working with? An outside payroll company, obviously the internal bookkeeper, CFO, like who are the voices and the talents that you're working with? Great, I love that. The CFO is often the perfect person. I think the nonprofit has to decide we wanna pursue this. And so often, you know, it really is kind of your, you know, maybe the executive director that makes the decision of, yes, we wanna move forward with this. Because I feel like sometimes it gets lost in translation when someone's trying to explain it, you know, up above and they're like, oh, that doesn't really make sense. So if we can get to that person to explain it, then they can say yay, you know, yay or nay, this isn't something we wanna pursue. So typically it's that person and then we'll say, well, wait, I want my CFO or I want my accountant or I want somebody else on the call to listen because they are the people that are actually gonna provide the information. So we really need the decision maker and we, you know, and if that's the CFO or whoever, that's great to move forward with this. I am, I'll just mention this to you. I'm going to speak to a board of directors next week for it's actually a preschool that we've gotten so much money for them that's potentially coming their way that their board of directors said, I need to hear about this. I need more details. This doesn't feel right. It feels like it's too much, which is really interesting. And too good to be true. And that is actually, I'm so glad you mentioned board of directors because, you know, with 1.8 million nonprofits registered in the US, they are all governed by a board of directors. And let's say on average, there's seven, you know, board members. Many have a lot more than that. I can only imagine there's so many board of directors, you know, serving their communities, listening to your conversation saying, hey, did my organization take advantage of that? And if not, should we? Right. Or yes, should we? Or well, well, we won't qualify this way. Or I heard this or my, you know, somebody told me that. So again, it's a pressure-free conversation. I'm certainly never, you know, nobody's going to push anybody to take advantage of this. But just having all the information, I think is the most important part of the whole thing. That's definitely. Is grabbing information. So this has been amazing. We don't have that much time left with you. And I have so many questions. And I'm sure after the show, I'll have even more questions because I'll be thinking about this all day. But you're talking about a group of outside providers and talent. Your company to other companies around the country, talk to us a little bit about that. I mean, there's a contract. How are you recompensed for this? Is it, do companies take a percentage? Do you get paid after you receive the money? And how does this work? Super, super important question. It's a, we say we work on a success-free basis. We do take a percentage of the amount that you're going to receive. The IRS specifically put out a notice that says, there are people gouging, you know, customers. I mean, and particularly nonprofits, the money needs to go back to the nonprofit. So depending on the size, we take anywhere from 10% up to 18%. 18% is if you've got two to five people, a really tiny one. Typically we're in the 10 to 15 range. You know, a lot, we were hearing a lot of 25, 30%. So that's a super important question. Again, when you're asking your provider, what is your percentage? So the only time that we invoice is when you've gone through the process and that check's been deposited into your bank account. At that point, we will invoice you. If for some reason we start down the path and you speak to our processing department and she said, I can't back this up. I'm sorry, we can't help you. No money is exchanged. Wow. You know, so thank you for sharing it because that was like for a nonprofit when you're strapped for cash anyway and you think, oh my gosh, am I going to chase something that is going to cost me money and that, you know, will... Well, time and money. Yeah, time and money. We have a question that came in and again, we don't have too much time, but somebody writes in, how does a nonprofit apply for the Employment Credit Act when they use a PEO for HR functions, including payroll? We do not have Form 941 and other documentation. Yes, so we are actually working with a PEO right now and all of their clients. So in that case, I, you know, we would have a one-on-one conversation and we would be able to get that information from the PEO. So they would be able to provide. They would still be eligible. Yeah. Interesting. I love hearing that. Yeah, because I've heard from many organizations that either use a PEO, so that was a really good question to ask, are looking to move to a PEO and what that might need, you know, for this credit. And so great question to the person that was so astute to ask that live and thank you, Liz, for answering that, that they're still eligible. Yes. Great. Absolutely. And then you've like created a Firestorm of questions. One more, we'll get to one more. Somebody writes in, do you have a schedule on the deadlines that you could share with us or where somebody might be able to get that? Because one of the things that I heard you say in the very beginning is that this has been very flexible and there have been a lot of changes. How would we best educate ourselves to these deadlines? I think simply, okay? So here's the simplest terms I'm gonna answer that question. To claim the credit for 2020, the deadline is April of 2024. After that time, you can no longer do it. April 20. The deadline for 2021 is April of 2025. Okay. Those are the two deadlines right there. Two deadlines. That's a good question. Very good question. As we know, time goes quickly. So this is one of those things that we wanna, you know, kind of drag our feet on. This has been a great conversation, Liz. You've stirred up so many thoughts and opportunities for so many of us in the nonprofit sector. And so I'm so, so delighted that you came on to kind of help share with us this process and what it looks like, what it costs and how we can seek to engage in it because our nonprofit sector still had to keep working, still had to keep providing services and to a large extent even more during this time. And so it's been really, really interesting. Liz Pearson, Economic Incentives Advisory Group, check out their website, eiagincent.com. It is very comprehensive, talks a lot about the different opportunities that are out there. And I was fascinated by your website because I had no idea that this ecosystem existed for us in the nonprofit and of course in the for-profits. So yeah, Economic Incentives Advisory Group, really an interesting conversation today. Again, I'm Julia Patrick, CEO of the American Nonprofit Academy, been joined by the nonprofit nerd herself. I like to say she's my nonprofit nerd. Garrett Ransom, CEO of the Raven Group. And again, without the support of all of our amazing sponsors, we wouldn't have people like Liz on here today. Everyone from Blumerang, American Nonprofit Academy, your part-time controller, nonprofit thought leader, Fundraising Academy at National University, Staffing Boutique, and of course, nonprofit nerd. They're the folks that are with us day in and day out. And so we wanna make sure that we express our gratitude to them. Okay, wow, Jared, another day where my mind has been blown. What about you? I know, I just feel like there's so many organizations that as you mentioned, Liz, potentially $500,000 more or less that fluctuates, they could be leaving money on the table. So this is pressure-free. Why not engage in a conversation? I'm always learning in these conversations. And as I told you, Julia, those days that I'm not able to make the show, I really miss it. So I'm glad I was here for this one. Yeah, it's just fascinating, Liz. And I think it also opens up the mind of our nonprofits of how we serve our communities and what it looks like. And it's not always just the same old, same old. We need to be using flexible thinking. We need to be thinking about how the ecosystem of our different governments work and how we support them so that we can ultimately achieve our mission, vision and value. So it's- Can I make one quick comment? Yeah, absolutely. I always like to leave with this thought of the amount of time, effort, manpower it takes to raise say $500,000, even $100,000 versus the time and effort it takes to take advantage of this. It's unbelievable. I get emails constantly like, will you send $100? Will you send $100? And I'm thinking, why don't I send you $100,000? So that is a great comment. You're so right. And with, again, all of these organizations and Julia, I know that we are still feeling the pressure from many of our guests that have come on over the years, these last four years, because we started in March of 2020 saying, we just don't know if we're gonna make it. Right. Oh my God, yeah, yeah. I mean, it's been chilling and it has a chilling effect across our sector. So this has been amazing. I've loved this conversation. Thank you so much, Liz. Thank you, Jared. It's been a lot of fun. As we like to end every episode, we want to remind everyone, ourselves, our guests, our sponsors to stay well so you can do well. We'll see you back here tomorrow.