WASHINGTON, D.C. — Today, Congressman David Schweikert, alongside Congressmen Jared Golden (D-ME), Mike Kelly (R-PA), and Glenn Grothman (R-WI), 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; dramatically increase penalties on those defrauding the government; and aid the Internal Revenue Service (IRS) in getting out the door honest, low-risk returns from small businesses. The original design of the ERTC was to help Main Street retain employees during the pandemic. However, legitimate returns from small businesses desperately needing support were crowded out by perverse promoters looking to take advantage of an emergency program, landing ERTC on the IRS’s “Dirty Dozen” list in 2023.

Earlier this summer, IRS Commissioner Danny Werfel asked for Congress’ “help with this situation” and assist Treasury to “address fraud and error.” The ERTC Repeal Act would enable the return to fiscal sanity and end a program riddled with fraud that could cost up to seven times more—up to $550 billion—than initially estimated if allowed to continue. By eliminating the ERTC program, this bill would save taxpayers an estimated $79 billion over ten years.  

“We’ve all heard from the number of small businesses in our district waiting for their claims to be processed,” said Rep. David Schweikert (AZ-01). “A 1.4 million return backlog still exists, and moving the deadline up, rather than waiting until April 2025, will enable the IRS to go after the bad actors seeking to take advantage of taxpayers while approving legitimate claims faster and delivering long-overdue refunds to small businesses. Congress would be perpetuating a moral hazard if this level of fraud were allowed to go unpunished. It’s past time fiscal responsibility prevails, and we act on behalf of future generations who will be shouldered with a more than $35 trillion national debt.”

“This tax credit was an emergency response to protect workers and small businesses during the pandemic. Today, bad actors are abusing the program to pad their bottom lines at Americans’ expense,” Congressman Jared Golden (ME-02) said. “It’s past time we end this program — the conditions that made it necessary are over, and it’s a ripe target for tax cheats. Taking it off the books will protect taxpayers from fraud.”

Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said, “Although the COVID public health and economic emergency has ended, our national debt and fiscal challenges continue to mount. We thank Representatives Schweikert (R-AZ) and Golden (D-ME) for introducing the House version of legislation to repeal the Employee Retention Tax Credit (ERTC), which is rife with fraud and has significantly overshot the original cost estimate, increasing the national debt. Given that the economy has recovered from the pandemic, it’s clear that this tax credit has outlived its purpose. We encourage Congress to pass this bipartisan, bicameral bill without delay and save $80 billion as a first step toward putting our country back on a fiscally sustainable path.”

Background of the Employee Retention Tax Credit Repeal Act:

• 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. Fraud within the program became so prevalent that it then earned a place on the “Dirty Dozen” list of schemes and scams that make taxpayers vulnerable to personal and financial risk in March of 2023.

The ERTC Repeal Act would bring forward the sunset date of the ERTC and disallow the processing of ERTC claims filed after January 31, 2024. Additionally, this bill would:

• Increase penalties for promoters from $1,000 to $10,000 for individuals and $200,000 for business promoters;
• Impose a $1,000 penalty for failure to comply with due diligence requirements; and
• Extend the statute of limitations period on assessments to six years.

Full bill text can be found here.

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Congressman David Schweikert serves on the Ways and Means Committee and is the current Chairman of the Oversight Subcommittee. He is also the Vice Chairman on the bicameral Joint Economic Committee, chairs the Congressional Valley Fever Task Force, and is the Republican Co-Chair of the Blockchain Caucus, Telehealth Caucus, Singapore Caucus, and the Caucus on Access to Capital and Credit.