I 

118TH CONGRESS 

2D SESSION H. R. 9738 

To increase the penalties applicable to persons facilitate fraud with respect 

to any COVID-related employee retention credit, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

SEPTEMBER 20, 2024 

Mr. SCHWEIKERT introduced the following bill; which was referred to the 

Committee on Ways and Means 

A BILL 

To increase the penalties applicable to persons facilitate 

fraud with respect to any COVID-related employee retention credit, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. ENFORCEMENT PROVISIONS WITH RESPECT TO 

4 COVID-RELATED EMPLOYEE RETENTION 

5 CREDITS. 

6 (a) INCREASE IN ASSESSABLE PENALTY ON COVID– 

7 ERTC PROMOTERS FOR AIDING AND ABETTING UNDER8 STATEMENTS OF TAX LIABILITY.— 

9 (1) IN GENERAL.—If any COVID–ERTC pro10 moter is subject to penalty under section 6701(a) of 


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1 the Internal Revenue Code of 1986 with respect to 

2 any COVID–ERTC document, notwithstanding 

3 paragraphs (1) and (2) of section 6701(b) of such 

4 Code, the amount of the penalty imposed under such 

5 section 6701(a) shall be the greater of— 

6 (A) $200,000 ($10,000, in the case of a 

7 natural person), or 

8 (B) 75 percent of the gross income derived 

9 (or to be derived) by such promoter with re10 spect to the aid, assistance, or advice referred 

11 to in section 6701(a)(1) of such Code with re12 spect to such document. 

13 (2) NO INFERENCE.—Paragraph (1) shall not 

14 be construed to create any inference with respect to 

15 the proper application of the knowledge requirement 

16 of section 6701(a)(3) of the Internal Revenue Code 

17 of 1986. 

18 (b) FAILURE TO COMPLY WITH DUE DILIGENCE RE19 QUIREMENTS TREATED AS KNOWLEDGE FOR PURPOSES

20 OF ASSESSABLE PENALTY FOR AIDING AND ABETTING

21 UNDERSTATEMENT OF TAX LIABILITY.—In the case of 

22 any COVID–ERTC promoter, the knowledge requirement 

23 of section 6701(a)(3) of the Internal Revenue Code of 

24 1986 shall be treated as satisfied with respect to any 

25 COVID–ERTC document with respect to which such proVerDate Sep 11 2014 01:00 Oct 04, 2024 Jkt 059200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H9738.IH H9738

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1 moter provided aid, assistance, or advice, if such promoter 

2 fails to comply with the due diligence requirements re3 ferred to in subsection (c)(1). 

4 (c) ASSESSABLE PENALTY FOR FAILURE TO COMPLY

5 WITH DUE DILIGENCE REQUIREMENTS.— 

6 (1) IN GENERAL.—Any COVID–ERTC pro7 moter which provides aid, assistance, or advice with 

8 respect to any COVID–ERTC document and which 

9 fails to comply with due diligence requirements im10 posed by the Secretary with respect to determining 

11 eligibility for, or the amount of, any COVID-related 

12 employee retention tax credit, shall pay a penalty of 

13 $1,000 for each such failure. 

14 (2) DUE DILIGENCE REQUIREMENTS.—Except 

15 as otherwise provided by the Secretary, the due dili16 gence requirements referred to in paragraph (1) 

17 shall be similar to the due diligence requirements 

18 imposed under section 6695(g). 

19 (3) RESTRICTION TO DOCUMENTS USED IN

20 CONNECTION WITH RETURNS OR CLAIMS FOR RE21 FUND.—Paragraph (1) shall not apply with respect 

22 to any COVID–ERTC document unless such docu23 ment constitutes, or relates to, a return or claim for 

24 refund. 


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1 (4) TREATMENT AS ASSESSABLE PENALTY, 

2 ETC.—For purposes of the Internal Revenue Code of 

3 1986, the penalty imposed under paragraph (1) shall 

4 be treated in the same manner as a penalty imposed 

5 under section 6695(g). 

6 (5) SECRETARY.—For purposes of this sub7 section, the term ‘‘Secretary’’ means the Secretary 

8 of the Treasury or the Secretary’s delegate. 

9 (d) ASSESSABLE PENALTIES FOR FAILURE TO DIS10 CLOSE INFORMATION, MAINTAIN CLIENT LISTS, ETC.— 

11 For purposes of sections 6111, 6112, 6707 and 6708 of 

12 the Internal Revenue Code of 1986— 

13 (1) any COVID-related employee retention tax 

14 credit (whether or not the taxpayer claims such 

15 COVID-related employee retention tax credit) shall 

16 be treated as a listed transaction (and as a report17 able transaction) with respect to any COVID–ERTC 

18 promoter if such promoter provides any aid, assist19 ance, or advice with respect to any COVID–ERTC 

20 document relating to such COVID-related employee 

21 retention tax credit, and 

22 (2) such COVID–ERTC promoter shall be 

23 treated as a material advisor with respect to such 

24 transaction. 


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1 (e) COVID–ERTC PROMOTER.—For purposes of 

2 this section— 

3 (1) IN GENERAL.—The term ‘‘COVID–ERTC 

4 promoter’’ means, with respect to any COVID– 

5 ERTC document, any person which provides aid, as6 sistance, or advice with respect to such document 

7 if— 

8 (A) such person charges or receives a fee 

9 for such aid, assistance, or advice which is 

10 based on the amount of the refund or credit 

11 with respect to such document and, with respect 

12 to such person’s taxable year in which such per13 son provided such assistance or the preceding 

14 taxable year, the aggregate gross receipts of 

15 such person for aid, assistance, and advice with 

16 respect to all COVID–ERTC documents ex17 ceeds 20 percent of the gross receipts of such 

18 person for such taxable year, or 

19 (B) with respect to such person’s taxable 

20 year in which such person provided such assist21 ance or the preceding taxable year— 

22 (i) the aggregate gross receipts of 

23 such person for aid, assistance, and advice 

24 with respect to all COVID–ERTC docu25 ments exceeds 50 percent of the gross reVerDate Sep 11 2014 01:00 Oct 04, 2024 Jkt 059200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H9738.IH H9738

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1 ceipts of such person for such taxable year, 

2 or 

3 (ii) both— 

4 (I) such aggregate gross receipts 

5 exceeds 20 percent of the gross re6 ceipts of such person for such taxable 

7 year, and 

8 (II) the aggregate gross receipts 

9 of such person for aid, assistance, and 

10 advice with respect to all COVID– 

11 ERTC documents (determined after 

12 application of paragraph (3)) exceeds 

13 $500,000. 

14 (2) EXCEPTION FOR CERTIFIED PROFESSIONAL

15 EMPLOYER ORGANIZATIONS.—The term ‘‘COVID– 

16 ERTC promoter’’ shall not include a certified profes17 sional employer organization (as defined in section 

18 7705). 

19 (3) AGGREGATION RULE.—For purposes of 

20 paragraph (1)(B)(ii)(II), all persons treated as a 

21 single employer under subsection (a) or (b) of sec22 tion 52 of the Internal Revenue Code of 1986, or 

23 subsection (m) or (o) of section 414 of such Code, 

24 shall be treated as 1 person. 


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1 (4) SHORT TAXABLE YEARS.—In the case of 

2 any taxable year of less than 12 months, paragraph 

3 (1) shall be applied with respect to the calendar year 

4 in which such taxable year begins (in addition to ap5 plying to such taxable year). 

6 (f) COVID–ERTC DOCUMENT.—For purposes of 

7 this section, the term ‘‘COVID–ERTC document’’ means 

8 any return, affidavit, claim, or other document related to 

9 any COVID-related employee retention tax credit, includ10 ing any document related to eligibility for, or the calcula11 tion or determination of any amount directly related to 

12 any COVID-related employee retention tax credit. 

13 (g) COVID-RELATED EMPLOYEE RETENTION TAX

14 CREDIT.—For purposes of this section, the term 

15 ‘‘COVID-related employee retention tax credit’’ means— 

16 (1) any credit, or advance payment, under sec17 tion 3134 of the Internal Revenue Code of 1986, 

18 and 

19 (2) any credit, or advance payment, under sec20 tion 2301 of the CARES Act. 

21 (h) LIMITATION ON CREDIT AND REFUND OF

22 COVID-RELATED EMPLOYEE RETENTION TAX CRED23 ITS.—Notwithstanding section 6511 of the Internal Rev24 enue Code of 1986 or any other provision of law, no credit 

25 or refund of any COVID-related employee retention tax 


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1 credit shall be allowed or made after January 31, 2024, 

2 unless a claim for such credit or refund is filed by the 

3 taxpayer on or before such date. 

4 (i) AMENDMENTS TO EXTEND LIMITATION ON AS5 SESSMENT.— 

6 (1) IN GENERAL.—Section 3134(l) of the Inter7 nal Revenue Code of 1986 is amended to read as fol8 lows: 

9 ‘‘(l) EXTENSION OF LIMITATION ON ASSESSMENT.— 

10 ‘‘(1) IN GENERAL.—Notwithstanding section 

11 6501, the limitation on the time period for the as12 sessment of any amount attributable to a credit 

13 claimed under this section shall not expire before the 

14 date that is 6 years after the latest of— 

15 ‘‘(A) the date on which the original return 

16 which includes the calendar quarter with re17 spect to which such credit is determined is filed, 

18 ‘‘(B) the date on which such return is 

19 treated as filed under section 6501(b)(2), or 

20 ‘‘(C) the date on which the claim for credit 

21 or refund with respect to such credit is made. 

22 ‘‘(2) DEDUCTION FOR WAGES TAKEN INTO AC23 COUNT IN DETERMINING IMPROPERLY CLAIMED

24 CREDIT.— 


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1 ‘‘(A) IN GENERAL.—Notwithstanding sec2 tion 6511, in the case of an assessment attrib3 utable to a credit claimed under this section, 

4 the limitation on the time period for credit or 

5 refund of any amount attributable to a deduc6 tion for improperly claimed ERTC wages shall 

7 not expire before the time period for such as8 sessment expires under paragraph (1). 

9 ‘‘(B) IMPROPERLY CLAIMED ERTC

10 WAGES.—For purposes of this paragraph, the 

11 term ‘improperly claimed ERTC wages’ means, 

12 with respect to an assessment attributable to a 

13 credit claimed under this section, the wages 

14 with respect to which a deduction would not 

15 have been allowed if the portion of the credit to 

16 which such assessment relates had been prop17 erly claimed.’’. 

18 (2) APPLICATION TO CARES ACT CREDIT.—Sec19 tion 2301 of the CARES Act is amended by adding 

20 at the end the following new subsection: 

21 ‘‘(o) EXTENSION OF LIMITATION ON ASSESSMENT.— 

22 ‘‘(1) IN GENERAL.—Notwithstanding section 

23 6501 of the Internal Revenue Code of 1986, the lim24 itation on the time period for the assessment of any 

25 amount attributable to a credit claimed under this 


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1 section shall not expire before the date that is 6 

2 years after the latest of— 

3 ‘‘(A) the date on which the original return 

4 which includes the calendar quarter with re5 spect to which such credit is determined is filed, 

6 ‘‘(B) the date on which such return is 

7 treated as filed under section 6501(b)(2) of 

8 such Code, or 

9 ‘‘(C) the date on which the claim for credit 

10 or refund with respect to such credit is made. 

11 ‘‘(2) DEDUCTION FOR WAGES TAKEN INTO AC12 COUNT IN DETERMINING IMPROPERLY CLAIMED

13 CREDIT.— 

14 ‘‘(A) IN GENERAL.—Notwithstanding sec15 tion 6511 of such Code, in the case of an as16 sessment attributable to a credit claimed under 

17 this section, the limitation on the time period 

18 for credit or refund of any amount attributable 

19 to a deduction for improperly claimed ERTC 

20 wages shall not expire before the time period 

21 for such assessment expires under paragraph 

22 (1). 

23 ‘‘(B) IMPROPERLY CLAIMED ERTC

24 WAGES.—For purposes of this paragraph, the 

25 term ‘improperly claimed ERTC wages’ means, 


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1 with respect to an assessment attributable to a 

2 credit claimed under this section, the wages 

3 with respect to which a deduction would not 

4 have been allowed if the portion of the credit to 

5 which such assessment relates had been prop6 erly claimed.’’. 

7 (j) EFFECTIVE DATES.— 

8 (1) IN GENERAL.—Except as otherwise pro9 vided in this subsection, the provisions of this sec10 tion shall apply to aid, assistance, and advice pro11 vided after March 12, 2020. 

12 (2) DUE DILIGENCE REQUIREMENTS.—Sub13 sections (b) and (c) shall apply to aid, assistance, 

14 and advice provided after the date of the enactment 

15 of this Act. 

16 (3) LIMITATION ON CREDIT AND REFUND OF

17 COVID-RELATED EMPLOYEE RETENTION TAX CRED18 ITS.—Subsection (h) shall apply to credits and re19 funds allowed or made after January 31, 2024. 

20 (4) AMENDMENTS TO EXTEND LIMITATION ON

21 ASSESSMENT.—The amendments made by subsection 

22 (i) shall apply to assessments made after the date of 

23 the enactment of this Act. 

24 (k) TRANSITION RULE WITH RESPECT TO REQUIRE25 MENTS TO DISCLOSE INFORMATION, MAINTAIN CLIENT


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1 LISTS, ETC.—Any return under section 6111 of the Inter2 nal Revenue Code of 1986, or list under section 6112 of 

3 such Code, required by reason of subsection (d) of this 

4 section to be filed or maintained, respectively, with respect 

5 to any aid, assistance, or advice provided by a COVID– 

6 ERTC promoter with respect to a COVID–ERTC docu7 ment before the date of the enactment of this Act, shall 

8 not be required to be so filed or maintained (with respect 

9 to such aid, assistance or advice) before the date which 

10 is 90 days after such date. 

11 (l) PROVISIONS NOT TO BE CONSTRUED TO CREATE

12 NEGATIVE INFERENCES.— 

13 (1) NO INFERENCE WITH RESPECT TO APPLICA14 TION OF KNOWLEDGE REQUIREMENT TO PRE-EN15 ACTMENT CONDUCT OF COVID–ERTC PROMOTERS, 

16 ETC.—Subsection (b) shall not be construed to cre17 ate any inference with respect to the proper applica18 tion of section 6701(a)(3) of the Internal Revenue 

19 Code of 1986 with respect to any aid, assistance, or 

20 advice provided by any COVID–ERTC promoter on 

21 or before the date of the enactment of this Act (or 

22 with respect to any other aid, assistance, or advice 

23 to which such subsection does not apply). 

24 (2) REQUIREMENTS TO DISCLOSE INFORMA25 TION, MAINTAIN CLIENT LISTS, ETC.—Subsections 


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1 (d) and (k) shall not be construed to create any in2 ference with respect to whether any COVID-related 

3 employee retention tax credit is (without regard to 

4 subsection (d)) a listed transaction (or reportable 

5 transaction) with respect to any COVID–ERTC pro6 moter; and, for purposes of subsection (j), a return 

7 or list shall not be treated as required (with respect 

8 to such aid, assistance, or advice) by reason of sub9 section (d) if such return or list would be so re10 quired without regard to subsection (d). 

11 (m) REGULATIONS.—The Secretary (as defined in 

12 subsection (c)(5)) shall issue such regulations or other 

13 guidance as may be necessary or appropriate to carry out 

14 the purposes of this section (and the amendments made 

15 by this section). 

Æ 


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