Many employee stock ownership plans (ESOPs) have the misconception they can’t take advantage of the Employee Retention Credit (ERC) that was enacted as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act because a majority are tax exempt S Corporations. However, the ERC is an employment tax credit, not an income tax credit, making many ESOPs eligible so long as they meet other qualifications.

The ERC has evolved since its inception, and the IRS has issued several rounds of guidance to help clarify the rules about how organizations can claim the credit. Here’s what your ESOP needs to know about qualifying for the ERC.