OPINION: Protect Nevada Businesses, Protect the ERC

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 labor shortages, inflation, and supply chain disruptions. 

In Nevada there are 312,700 small businesses that employ 42 percent of the private sector work force.  It might surprise you to know that 99 percent of businesses in Nevada are small. Thus, 99 percent of Nevada businesses are most vulnerable to economic shifts. 

This is why a group of employers across many industries and tax professionals have joined together as the Coalition to Preserve American Jobs (CPAJ). CPAJ is committed to protecting America’s small businesses and workers during times of disaster and economic crisis by preserving their access to tax credits, such as the Employee Retention Credit (ERC). 

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. 

However, that tax credit is not working as Congress intended.  As of this writing, the IRS has imposed a moratorium on the processing of new ERC claims after September 14, 2023. As a result, over 1.4 million ERC claims remain unprocessed. 

For eligible employers, the ERC program has proven to help retain employees, as long as the business can access the program. The ERC has saved jobs and kept stores, hotels, and other vital employers open in Nevada. However, the IRS’ mismanagement of the program has resulted in tens of billions in unclaimed funds and a backlog of over 1.3 million claims yet to be processed.

Despite employing a staff larger than the Department of Defense, the IRS has failed to administer the ERC in a competent and timely fashion, issuing multiple iterations of its own guidance that proved contradictory and confusing. As more than 1.4 million ERC claims remain in limbo, businesses across the country are struggling to keep their doors open and their staff employed. 

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 hung out to dry. 

Instances of fraud should be relentlessly pursued, prosecuted, and rooted out in taxpayer-funded government programs. 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 as Congress has directed.  They should 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 this bureaucratic quagmire. The IRS is crippling vulnerable small businesses and nonprofits and eliminating jobs. 

As a small business owner myself, and a financial consultant to companies around Nevada, the impact of this temporary moratorium is not an abstract concept. I see how it is affecting real people, real jobs, and our state’s economy. 

That is why I’m standing with CPAJ in urging Senator Cortez Masto, who serves on the Senate Finance Committee, to recognize the dire need to lift this moratorium and ensure continued support for the ERC through an extension of the sunset. I stand ready to amplify the voices of our community members, advocating for the small businesses that form the bedrock of our local economy. 

Senator Cortez Masto, please protect the ERC.