Details of Public Law 119-21, section 70605 , One Big Beautiful Bill Act

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136) created a refundable payroll tax credit known as the Employee Retention Tax Credit (ERTC) that was applied against applicable employment taxes. ERTC provided COVID-19 relief to employers whose operations were impacted by the shutdown.

This provision provides that any COVID-ERTC promoter who does not comply with the due diligence requirements (with respect to determining eligibility for the ERTC would be required to pay a penalty of $1,000 for each instance of noncompliance. The $1,000 penalty would be treated as a penalty imposed by the Secretary in the same manner taxes are assessed.

A “COVID-ERTC promoter” is defined as, any person who provides aid, assistance, or advice with respect to any COVID–ERTC document if, the person charges a fee based on the credit amount or refund and 20 percent or more of the person’s gross receipts are from ERTC-related services, or 50 percent or more of the person’s gross receipts are from ERTC-related services, or 20 percent or more of the person’s gross receipts are from ERTC-related services and the person’s gross receipts exceed $500,000.

A “COVID-ERTC promoter” does not include a certified professional employer organization.

A “COVID-ERTC Document” is defined as any return, affidavit, claim or other document related to eligibility for, or the calculation or determination of any amount directly related to any such credit or advance payment.

The provision specifies that no credit will be allowed and no refund is to be made after July 4, 2025, unless that claim for a credit or refund was filed by the taxpayer prior to January 31, 2024. Additionally, the statute of limitations on the assessment of amounts related to the ERTC would be extended to six years from the date the credit or claim for refund is made and this extension would also apply an assessment related to the wage deduction used to calculate the credit.

The provision expands the penalty for erroneous claim for refund or credit to also apply to excessive claims for refund or credit of employment tax.

The Secretary is required to issue regulations or other guidance that may be needed or appropriate to carry out the purpose of this provision.

The FTB does not administer employment taxes and the changes made by this provision do not impact the department. Employment taxes are administered by the Employment Development Department.