ERTC Funds – How Private Schools Can Qualify

As the team at PBO Advisory Group has previously discussed, employers whose operations meet one of the following criteria qualify for the Employee Retention Tax Credit* program:

  • Experienced a significant decline in gross receipts in a calendar quarter compared to the same quarter in 2019
  • Were partially or fully suspended due to COVID-19 government closure orders

For private schools considering taking advantage of the ERTC program, at first look, it may seem that qualifying is a challenge. Due to the creative and effective pivoting that many private schools enacted in response to the pandemic, on the surface it may seem to be a challenge to meet one of these requirements, especially the decline in gross receipts.

According to PBO Advisory Group’s business development manager, who has helped many private school clients apply for the ERTC program, it’s like peeling an onion – you need to look beyond the surface.

We suggest creating a timeline of the measures taken to conform with pandemic restrictions, such as suspending onsite day care, after school programs, physical education or art classes, and anything else that was halted due to the suspension of face-to-face interaction. Examining revenue by each of these service lines could paint a completely different picture as to eligibility.

While a private school’s overall revenue may not have considerably declined due to an increase in donations during COVID and/or pivots the school made, the school’s ongoing revenue streams may have been significantly affected. And this could make the school eligible for the ERTC program.

Don’t overlook extracurricular activities, such as the suspension of sports and summer programs, and their effect on revenue.

Also, don’t forget about fundraising. In-person events, such as galas, typically bring in significant funds for private schools. Due to restrictions, these events were suspended during the past year, cutting off an important revenue stream.

With many families being in greater need due to the pandemic, the requests for financial aid have increased, adding to a school’s financial strain. ERTC funds would make a big difference in a private school’s financial stability and its ability to serve families.

If you would like more information about the ERTC program and how private schools should approach the application process, please contact us.

* The Consolidated Appropriations Act of 2021, which was signed into law on December 27, 2020, makes important changes to the provisions which broadened the ERTC, allowing even more employers to take advantage of this beneficial program.

Eligible employers can get immediate access to the credit by reducing employment tax deposits they are otherwise required to make. Also, if the employer’s employment tax deposits are not sufficient to cover the credit, the employer may get an advance payment from the IRS.