Romney, Tillis, Manchin Introduce Bipartisan Legislation to Repeal COVID-Era Tax Credit Riddled with Fraud

WASHINGTON—U.S. Senators Mitt Romney (R-UT), Thom Tillis (R-NC), and Joe Manchin (I-WV) today 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 on fraud. The ERTC has been highly susceptible to fraudulent schemes—costing taxpayers nearly 200% more than anticipated and adding an estimated $230 billion to the national debt through Fiscal Year 2023. By eliminating the ERTC, the senators’ bill would save taxpayers an estimated $79 billion over 10 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.

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. In addition, the program has seen a high volume of outright 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.

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