Utah Valley Times

U.S. Senators Mitt Romney (R-UT), Thom Tillis (R-NC), and Joe Manchin (I-WV) introduced the Employee Retention Tax Credit Repeal Act, a bipartisan bill aimed at discontinuing the processing of Employee Retention Tax Credit (ERTC) claims filed after January 31, 2024, and increasing penalties for fraud. The ERTC has been prone to fraudulent activities, resulting in costs nearly 200% higher than anticipated and contributing an estimated $230 billion to the national debt through Fiscal Year 2023. The proposed legislation is projected to save taxpayers approximately $79 billion over ten years.

“In a rare moment of widespread agreement in Washington, almost all members of Congress agree that we should eliminate the ERTC—which has been pervaded by fraud and cost nearly 200% more than originally projected,” said Senator Romney. “Stealing from the government is stealing from hardworking taxpayers. Instead of repurposing ERTC funds for future spending programs, we should eliminate this plagued credit now to lower our national debt.”

“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.”

“Congress established the ERTC during the onset of the COVID-19 pandemic to encourage businesses to retain employees during such unprecedented circumstances. As President Biden formally ended the COVID-19 Public Health Emergency in May 2023, it’s time for the IRS to move on, too. I’m proud to join the bipartisan ERTC Repeal Act, which would end the ERTC for claims submitted after January 31, 2024—cutting down on the staggering and unexpected costs of this program—and would enhance anti-fraud measures for claims still being processed,” said Senator Manchin.

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

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

Estimates suggest that through Fiscal Year 2023, the credit has added $230 billion to the deficit and could eventually cost up to $550 billion. 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 this credit are available until April 15, 2025.

Text of the Employee Retention Tax Credit Repeal Act can be found here.

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