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Texas is a beacon of opportunity for business and economic development, offering an ideal climate for job creators and entrepreneurs to achieve success. But even the most prosperous of business environments are not immune to crises and economic uncertainty. This is especially true for small businesses, which are responsible for two-thirds of all newly created U.S. jobs. A COVID pandemic exposed this vulnerability with many small businesses facing unprecedented challenges, from supply chain disruptions to revenue declines to forced closures by the government.
Many of us want to forget the pandemic – for good reason. But there are many small businesses who aren’t able to move on. They can’t forget or wish away the consequences of an event which caused real harm to their businesses and their employees.
This is exactly why a group of job creators across a wide array of industries have joined together to protect American businesses and workers. Specifically, the Coalition to Preserve American Jobs (CPAJ). CPAJ is committed to preserving their access to the Employee Retention Credit (ERC).
Unfortunately, as of this writing, the Internal Revenue Service (IRS) has unilaterally 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.
Congress implemented the Employee Retention Credit (ERC) in March of 2020 to incentivize and support employers’ ability to retain their workers on the payroll through the pandemic. The ERC program proved to be critical to eligible businesses, saving thousands of jobs across Texas. The program was first implemented following Hurricane Katrina in 2005 and has been deployed to foster economic aid and help employers preserve jobs during times of crisis. So, why would today be any different?
This program was enacted by Congress with the intent of being accessible until April 2025. Rather than following the law, the IRS abruptly imposed a moratorium on processing all ERC claims submitted after September 14, 2023. Some estimate that between 180,000-300,000 legitimate claims from business owners are currently languishing in bureaucratic red tape without any end in sight.
Compounding the problem is the fact that a recent survey conducted by OnDeck found that 70 percent of small businesses have less than four months of operating cash on hand. This is important because of the trickle-down effect this has on the rest of the economy. Small businesses owners who are facing a cash crunch are less likely to consider expanding their business, buying new equipment, or hiring new staff. When small businesses are hurting, we all hurt.
Curiously, the IRS has prioritized issuing denial letters for potentially fraudulent claims. While instances of fraud and abuse should not be tolerated, the IRS has decided to disregard the majority of legitimate, low-risk ERC claims and subvert the will of Congress by focusing on invalid claims. These two efforts shouldn’t be mutually exclusive for the IRS’s 78,000 employees to carry out our nation’s tax laws.
Worse still, the IRS is processing claims at a snail’s pace of 1,000-2,000 a week, meaning many American job creators won’t see the benefits they were promised by the government until the next decade. The IRS can and should use its resources to process valid claims immediately. It is wrong to ask businesses with good claims to wait any longer than they already have.
Chambers of commerce and other business organizations across Texas are using their voices to urge Senator Cornyn and other policymakers to acknowledge the effect of this moratorium, advocating for the immediate processing of low-risk ERC claims. We encourage every Texan to support their local businesses, neighbors, and friends to stand together to protect the ERC.
COVID-19 took the world by storm nearly four years ago, but the economic hardships are still lingering for too many Texas businesses. Every member of our community who loves - and depends on - local businesses that make Texas great is affected by this issue. It’s time for us to tell the IRS that enough is enough.
Ryan Taylor is the spokesperson for the Coalition to Preserve American Jobs (CPAJ), a national group comprised of associations representing small businesses and responsible tax professionals and CEO of 440 Strategies.