More than five years after Congress rushed COVID relief for employers into law, courts are still sorting out who gets paid. In a recent Employee Retention Credit (ERC) case, an Ohio taxpayer was seeking more than $20 million in unpaid ERC refunds for 2021. The court allowed the refund suit to continue but dismissed the company’s Administrative Procedure Act (APA) claims.

First Source Employee Management, Inc., an Ohio-based professional employer organization that files payroll tax returns for businesses, filed the case in the U.S. District Court for the Northern District of Ohio seeking unpaid ERC claims for the first two quarters of 2021 on behalf of its clients.

The IRS has previously paid First Source’s ERC claims for some quarters in 2020, but it did not pay the company’s claims for the first and second quarters of 2021. Those unpaid claims totaled about $11.1 million for the first quarter of 2021 and approximately $9.1 million for the second quarter of 2021. First Source sued to collect those claims, plus interest.

What is the ERC Program?

The ERC program was intended to help businesses keep the lights on during the pandemic. Under the ERC program, eligible employers included those that paid qualified wages to some or all employees after March 12, 2020, and before January 1, 2022. Typically, to qualify, a business needed to demonstrate that a government order fully or partially suspended operations due to the pandemic during 2020 or the first three calendar quarters of 2021, or that the business experienced a specific decline in gross receipts during the relevant periods in 2020 or the first three calendar quarters of 2021. Some businesses may also have qualified as recovery startup businesses for the third or fourth quarters of 2021.

In 2021, the IRS issued Notice 2021-20, which provided additional guidance on the........

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