The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025. It is the most significant piece of legislation affecting the Employee Retention Credit since the program was first created.
Q3 and Q4 2021 claims filed after January 31, 2024 are now permanently disallowed
Under Section 70605(d) of the OBBBA, the IRS is legally prohibited from paying or refunding Q3 and Q4 2021 ERC claims that were filed after January 31, 2024 — even if the business was actually eligible for the credit. If your claim falls into this category and has not yet been paid, it will not be paid.
The audit window for Q3 and Q4 2021 is now 6 years
The OBBBA extended the statute of limitations for Q3 and Q4 2021 ERC claims to six years from the later of:
- the date the original return was filed,
- the date the return is treated as filed under existing rules, or
- the date the ERC refund was received.
Businesses with Q3 or Q4 2021 claims should keep all records for at least six years from those dates.
A new 20% penalty now applies to erroneous ERC refund claims
Under § 6676, if your ERC claim is found to be incorrect, you may now face a 20% penalty on the erroneous amount — on top of repaying the credit plus interest.
ERC promoters now face federal fines
The OBBBA created a new legal category called “COVID-ERTC Promoters,” defined as any person who provided aid, assistance, or advice in connection with an ERC claim. Promoters who fail to meet new due diligence requirements face $1,000 fines per violation.