When Daniel Werfel, the commissioner of the Internal Revenue Service, testified before a House committee early this year, he tried to explain how a pandemic-era program had become an expensive government boondoggle.
Congress created the employee retention tax credit to support businesses and nonprofits that continued paying employees despite facing difficulty during the pandemic. But as time went on, and the public health crisis faded, more and more companies lined up to claim the government support, egged on by third-party companies that told them they could be eligible for millions, Mr. Werfel said.
“The further we got away from it, the more aggressive promoters and marketers started, in my opinion, taking advantage of honest small businesses and getting them to believe that they were eligible for a credit they truly weren’t eligible for,” Mr. Werfel told lawmakers in February.
Seated behind Mr. Werfel in the hearing room last February was Billy Long, whom President-elect Donald J. Trump would later name to lead the I.R.S. Mr. Long, a former Republican congressman, was in Washington working with Lifetime Advisors, a company that had developed a booming business encouraging organizations to claim the credit.
Mr. Long joined Lifetime’s network of salespeople soon after leaving Congress in 2023, pitching businesses and nonprofits in his former Missouri district, including swimming pool and roofing contractors, on taking the credit. He regularly sported a hat that said, “Ask me about E.R.T.C.” — the initials for the credit — as he sought out business.
Mr. Long referred his clients to Lifetime, which would prepare an application for the tax credit and keep a slice of the money from the I.R.S. One contract viewed by The New York Times showed Lifetime collecting 20 percent of a roughly $300,000 tax credit, with half of the client’s fee due once Lifetime submitted the claim and the rest due upon receipt of the credit.
In an interview he recorded with another promoter of the tax credit, Mr. Long said Lifetime had helped clients claim $1.3 billion in tax refunds. He said that “virtually every” business would qualify for the credit, encouraging people to disregard accountants who said they couldn’t claim it.
“I want to encourage everyone: If you’ve been told no, no, no by your C.P.A., at least give Promax and Lifetime a chance and let them see if you do qualify or not,” Mr. Long said, referring to certified public accountants and another sales entity.
Mr. Long said in that September 2023 interview that he helped only eligible companies claim the credit.
Soon afterward, the I.R.S. temporarily stopped accepting applications for the credit nationwide and warned that many claims appeared improper. Mr. Long did not respond to requests for an interview with The Times.
This article is based on interviews with former clients and employees of Lifetime Advisors, several of whom requested anonymity because they said they feared that Mr. Long, if confirmed to lead the I.R.S., could direct the tax agency to target them. The Times also viewed documents filed in lawsuits against Lifetime, as well as contracts the company signed with clients and public social media posts by Mr. Long and his associates.
The Times did not find evidence that Mr. Long or the companies he worked with defrauded their customers. Instead, Lifetime took an expansive view of eligibility for the credit despite I.R.S. efforts to limit its scope, sometimes challenging accountants who disagreed with its assessment. One of Mr. Long’s clients told The Times about backing out of working with Lifetime after the client’s organization decided it might not qualify for the credit.
Businesses that wrongly claim the credit may have to pay a penalty to the I.R.S., in addition to returning the credit. The I.R.S. warns against working with promoters that ask for a percentage of a company’s tax credit as payment: “You should always avoid a tax preparer basing their fee on the amount of the refund,” the tax collector says on its website.
Senate Democrats have requested information from Lifetime as well as Commerce Terrace Consulting, a Missouri entity that Mr. Long worked with to find clients. Some Republicans in the chamber, which would vote on his nomination, have said they want to learn more about Mr. Long and the work he did on the tax credit.
Lifetime Advisors and an owner of Commerce Terrace Consulting did not respond to requests for comment.
Lifetime was created two and a half years ago in the midst of a dispute the owners had with a previous partner in a tax preparation business. The Financial Industry Regulatory Authority had barred two of Lifetime’s leaders, Jon LaCasse in 2013 and Jeffrey Mohlman in 2015, from working as securities brokers.
At least two accredited accountants whom the company brought on to help handle the influx of tax filings left after raising concerns about how the firm prepared taxes, according to two people familiar with the matter. Some former clients of Lifetime Advisors later faced I.R.S. inquiries, the people said.
Cracking down on improper claims of the employee retention tax credit, which can provide eligible companies up to $26,000 per employee they had in 2020 and 2021, has been a top enforcement priority of the I.R.S. When Congress created the program, it was expected to cost the government $55 billion. As millions of claims swamped the I.R.S., the cost surpassed $230 billion, and some estimated that it could reach $550 billion.
Mr. Long’s time promoting the tax credit has raised questions among Democrats and tax experts about how aggressively he would seek to slow the flood of claims if he is confirmed. A spokesman for the Trump transition team did not respond to a request for comment.
‘Borders on Absurdity’
Lifetime Advisors was sued soon after it was created in June 2022. A former associate, Matthew Pearson, accused Lifetime and its founders of going behind his back to take money and clients from his company, which offered tax plans and help claiming the retention credit.
While the two sides ultimately entered into a confidential settlement, the federal suit paints a portrait of an enterprise rapidly signing up clients, collecting fees and then struggling to deliver the promised tax reductions.
“I won’t spend much time addressing the tax planning production since there has been very little and has been filled with unmet deliveries along with clients hiring attorneys and demanding their money back,” Mr. LaCasse, one of Lifetime’s founders, wrote to Mr. Pearson in an email in June 2022, blaming him for the problems, according to court documents.
Lifetime wrote in a court filing that it “was primarily formed to attempt to avoid complaints and lawsuits from aggrieved” clients of the venture with Mr. Pearson.
The new entity functioned much like the old one. Lifetime found clients through salespeople, who pitched the tax credit to churches, dentists, and other small businesses and organizations. Clients who referred more business to Lifetime salespeople were promised a commission. (Several Lifetime agents declined to comment.)
Lifetime sometimes took what accountants considered an aggressive stance on whether clients were eligible for the credit. One nonprofit organization, which has asked to remain anonymous, received roughly $300,000 from the I.R.S. after hiring Lifetime, according to documents reviewed by The Times. The group’s external auditor later questioned its eligibility for the credit, writing that Lifetime’s expansive interpretation of the credit’s rules “borders on absurdity.”
The group decided to return the money rather than risk an audit by the I.R.S. It also asked for a refund from Lifetime, according to correspondence viewed by The Times. A lawyer for Lifetime declined that request: “In sum, our position is that Lifetime earned its fee,” he wrote.
Lifetime also worked on broader tax plans for its clients, hiring additional staff, including certified public accountants, in the process. Several of those hires did not last long at the company.
“Once they got a client, they did a tax plan for the client — that was the practice,” said Tom Caulfield, who said he worked as the lead accountant for Lifetime from February to May 2023. “They had a bunch of issues and I was putting out a lot of fires, and after just four months, the guy who runs Lifetime said, ‘We’re going to terminate your services.’” Mr. Caulfield declined to answer several follow-up questions.
One person whom Lifetime paid $560,000 for less than a year of tax planning work later sued the company, claiming that he was a part owner. In that Wisconsin court case, Lifetime shot back that the man had been fired for poor performance and had exposed the company’s director of tax strategies to “malpractice liability.”
‘Very, Very Profitable’
During his time on Capitol Hill, Mr. Long was an early and enthusiastic supporter of Mr. Trump, repeatedly claiming that he invented the phrase “the Trump train.” While he wasn’t a member of the tax-writing committees, he repeatedly sponsored legislation that called for the abolition of the I.R.S., though the bills went nowhere.
Mr. Long, a six-term representative, entered the private sector in 2023 after losing the Republican primary for an open Senate seat in Missouri in 2022. It’s unclear how Mr. Long originally linked up with Lifetime, but by April 2023 he had held a sales call with the company’s sales agents and Mark Speake, according to a link on the Lifetime website. Mr. Speake is an owner of Commerce Terrace Consulting, a Missouri company that firms like Lifetime pay a commission for referring clients, according to a court filing by a co-owner of the firm.
Mr. Long attended a boot camp for Lifetime employees in the Minneapolis area, according to a former employee who also attended. In June 2023, Mr. LaCasse, as well as a Lifetime salesperson, made donations to a political action committee associated with Mr. Long, according to Federal Election Commission records. That month, Mr. Long, along with Mr. Speake, posed for a photo with Mr. Trump, with Mr. Long holding his hat promoting the tax credit.
Mr. Long, a former auctioneer and real estate agent, came to the work without any professional background in taxes. On his account on X, he describes himself as a “Certified Tax & Business Advisor” who can help people save 40 percent on their taxes.
Mr. Long received the certificate after attending a three-day course offered by Excel Empire, a Florida tax consulting company, a spokesman for the company told The Springfield News-Leader. Excel Empire was founded by Mr. Pearson, the man who settled his lawsuit against the founders of Lifetime.
Mr. Long courted businesses and organizations from his old congressional district, as well as people he knew from his time as an auctioneer. He called a trip to an auctioneer conference where he recruited clients “a very, very profitable trip for me.”
In a video clip discussing his work on the tax credit, he said he had helped an economic development group in Joplin, Mo., claim $3.6 million for the credit. Ryan Peterson, the chief executive of that group, the Economic Security Corporation of Southwest Area, said in a brief interview that it had ultimately dropped its claim after receiving advice that it may not qualify for the credit.
A former chief executive of the group, John Joines, praised Mr. Long for trying to help it. “Billy Long did absolutely everything to make sure we filled out a proper application, that they properly vetted it,” Mr. Joines said. “It was positive experience until we got word that there are things you need to look out for.”
In September 2023, the I.R.S. sent shock waves through the industry that had grown up around the employee retention tax credit when it temporarily stopped processing new claims and promised to step up its scrutiny of the credit. The House later passed bipartisan legislation that would have shut down the program, but it was part of a tax deal that failed in the Senate.
Later that year, Lifetime stopped helping clients make new claims for the credit. It also hired Husch Blackwell Strategies — a Washington lobbying operation that now employs former Senator Roy Blunt, who once represented Mr. Long’s House district — to monitor developments on the credit, according to lobbying disclosures.
Mr. Long traveled to Washington in February to lobby for the approval of more credit claims and stop in on Mr. Werfel’s appearance before the House. Mr. Speake, in a video discussing the trip to Washington he took with Mr. Long, told clients that they should not listen to accountants who told them they were not eligible for the credit.
“There’s a lot of misinformation going out, a lot of people saying you need to withdraw your filings, pay back your refunds,” Mr. Speake said. “In our case, we are saying, ‘No, you don’t need to do that, because we did due diligence.’ We did substantially qualify our clients.”
Mr. Speake, who declined requests for comment, was later sued by a co-owner of Commerce Terrace Consulting, who accused him of not properly paying the company’s taxes. In legal filings, Mr. Speake denied the allegations.
Whether Mr. Long intends to make it easier to claim the credit at the I.R.S. is unclear. After the election last month, he posted several photos of himself with other Trump allies at the president-elect’s properties, including one in which he wears a Lifetime Advisors polo shirt.
The post How a Consulting Firm and Trump’s I.R.S. Pick Pushed a Problematic Tax Credit appeared first on New York Times.
