WASHINGTON, D.C. – Senator Thom Tillis, alongside Senators Mitt Romney (R-UT) and Joe Manchin (I-WV), recently introduced the Employee Retention Tax Credit Repeal Act, bipartisan legislation that would disallow the processing of Employee Retention Tax Credit (ERTC) claims filed after January 31, 2024, and increase penalties for fraud.

“Repealing the ERTC is a critical step towards addressing America’s debt crisis,” said Senator Tillis. “It’s past time to eliminate this fraud-ridden pandemic-era policy so we can concentrate on getting our fiscal house in order.”

Background:

The Employee Retention Tax Credit (ERTC)—created by the CARES Act and furthered expanded by the Consolidated Appropriations Act of 2021 and the American Rescue Plan—is a refundable credit available to qualifying businesses who paid wages to employees during the COVID-19 pandemic.

In October 2021, the IRS issued a notice warning employers of “third parties promoting improper Employee Retention claims.” These “promoters” often use aggressive and deceptive marketing tactics to convince businesses to allow them to file ERTC claims on their behalf. According to the Financial Crimes Enforcement Network (FinCEN), “promoters typically charge a large upfront fee, sometimes upwards of 30-40% of the expected credit amount” as payment for their services. The program has seen a high volume of fraudulent claims.

Estimates suggest the credit has added $230 billion to the deficit through Fiscal Year 2023 and could eventually cost up to $550 billion. Further, in June 2024, the IRS announced that between 10% and 20% of claims showed “clear signs of being erroneous” while another 60% to 70% showed an “unacceptable risk” of being improper. Unless Congress acts, applications for the credit are available until April 15, 2025.

Full text of the bill can be found HERE.

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