Op-Ed: Protect North Carolina Businesses, Protect the ERC
By Matt Mills Owner of Poultry Equipment Plus- Marshville NC
In the mosaic of domestic economic vitality, American businesses are the mortar holding our country together. Small businesses, in particular, are responsible for two-thirds of all newly created U.S. jobs, yet they are the most vulnerable to economic shifts and have faced unprecedented challenges in recent years – from lingering effects of the COVID-19 pandemic to persistent supply chain disruptions.
This is exactly why a group of employers across industries and responsible tax professionals has joined together as the Coalition to Preserve American Jobs (CPAJ). CPAJ is committed to protecting American businesses and workers during future times of disaster and economic crisis by preserving their access to tax credits, such as the Employee Retention Credit (ERC). As of this writing, the Internal Revenue Service (IRS) has imposed a moratorium on the processing of new ERC claims after September 14, 2023. As a result, over one million ERC claims remain unprocessed.
In March 2020, Congress deployed the ERC benefit as part of the bipartisan Coronavirus Aid, Relief, and Economic Security(CARES) Act to incentivize and fortify businesses’ ability to retain workers through the pandemic. Workers who experience job displacement are statistically more likely to be unemployed for extended periods of time – sending ripple effects throughout the entire U.S. economy. Since Hurricane Katrina in 2005, the federal government has leveraged the ERC program as a pragmatic way to disperse critical and expeditious economic aid to help employers preserve jobs during times of crisis and natural disasters. The COVID-19 era ERC is no different.
For eligible employers, the ERC program has proven to be crucial to businesses – at least the ones that have been able to access it – saving jobs and keeping restaurants, hotels, and other vital employers open in North Carolina and communities around America. However, the IRS’ mismanagement of the program has resulted in tens of billions in unclaimed funds and a backlog of over a million claims with some small business owners waiting months for disbursement.
Despite employing a staff larger than the Department of Defense, Department of State, and the Department of Homeland Security, the IRS has failed to administer this ERC in a competent and timely fashion; in fact, the IRS has issued multiple iterations of its own guidance that, in many ways, ultimately proved contradictory and confusing. As more than a million ERC claims remain in limbo, businesses across the North Carolina have closed their doors waiting on this critical relief.
Instead of using its vast resources to deliver tax relief to American job creators, the IRS has thrown its hands up and announced a moratorium on processing new ERC claims, citing purported concerns over fraud, essentially leaving businesses, especially vulnerable small businesses, hung out to dry.
Instances of fraud should be relentlessly pursued, prosecuted, and rooted out in taxpayer-funded government programs. Instead of rooting out fraudulent actors, the IRS has decided to go against the will of Congress, failing to do the one job that its 78,000 employees are expected to do – carry out our nation’s tax laws. Currently, there have been 3.6 million filings for the ERC, and as of July 31, 2023, the IRS has only initiated 323 investigations of potentially fraudulent ERC claims. Of those investigations, just 15 have resulted in federal charges and six convictions.
No amount of fraud in government programs should be tolerated. Still, the truth is instances of widespread fraud in essential programs, like Medicare and Medicaid, are well-documented, costing taxpayers an estimated $100 billion per year. Yet no serious lawmaker or federal agency is calling for a moratorium or freezing of those programs – nor should they – due solely to the fact that there is fraud. Similarly, the IRS should do its job, minimize and aggressively pursue instances of fraud, while at the same time addressing the substantial backlog of claims and long waits for funds that trapped businesses in a bureaucratic quagmire, hindering their recovery and growth at best, and crippling the most vulnerable small businesses and eliminating jobs at worst.
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