OBBB ERC Prohibitions
2025's One Big Beautiful Bill, or OBBB, contained new restrictions that will impact taxpayers seeking to claim the COVID-era employee retention credit (ERC) for the third and fourth quarters of 2021. As of July 4, 2025 (the date the OBBB was signed into law), the IRS is prohibited from allowing or issuing refunds related to ERC claims filed after January 31, 2024 that are related to the third and fourth quarters of 2021. IRS FAQ has since confirmed that taxpayers who have already received ERC-related refunds will not be required to repay those amounts even if their claim was filed after January 31, 2024 (however, additional IRS compliance-related activities could result in an adjustment).
We asked two professors and authors of Tax Facts with opposing political viewpoints to share their opinions about the OBBB changes prohibiting certain ERC claims.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Their Reasons:
Byrnes: It makes complete sense that the government should prohibit the IRS from issuing refunds or allowing ERC credits made so late in the game. The COVID-era employment crisis is long over. We have to expect and recognize that ERC claims for the third and fourth quarters of 2021 that were not filed until 2024 or 2025 are much more likely to be improper or even outright fraudulent.
Bloink: Taxpayers are permitted to file amended returns both to fix problems and claim benefits that they missed in prior years--that's always been the case and should continue to be the case. This new standard came out of nowhere--and now prohibits the IRS from allowing even legitimate ERC claims for taxpayers who may have had good reason for the delays in claiming the credits. This type of blanket prohibition is entirely uncalled for.
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Byrnes: This new OBBB prohibition does not impact claims that were processed by the IRS before July 4, 2025, when the OBBB was signed into law. Going forward, it provides a bright-line denial for taxpayers who are likely only filing claims because of aggressive claims that have been made by scam-artist promoters. American taxpayers should not have to pay for fraudulent claims—and they shouldn't have to pay the IRS to continue carefully weeding out those illegitimate claims.
Bloink: The fact is, COVID was an extremely overwhelming time. That's true even for taxpayers who weren't dealing with illness themselves--or caring for ill family members. There are many legitimate reasons why a taxpayer may have delayed immediately claiming the ERC—namely, because many didn't even know that the option existed until time had passed.
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Byrnes: There's no reason why taxpayers should be entitled to claim these credits so far after the threats posed by COVID-related shutdowns have dissipated. The government has wasted enough money investigating and weeding out millions of fraudulent claims. This new rule simply eliminates the waste and stops the abuse—showing how President Trump is following through on yet another one of his campaign promises.
Bloink: Yes, some time has passed--but that doesn't mean the damage caused to businesses during COVID was any less impactful. Many businesses continue to struggle with the losses they experienced during that time--and may have been entirely unaware of the relief provided by the ERC. Exceptions should exist for taxpayers who are legitimately eligible for the ERC and can demonstrate the delay was due to some reasonable cause.