Superior Pediatric Care, Inc., a for-profit corporation specializing in speech, occupational, and physical therapy services primarily for school children in the Northern District of Texas, has filed an original complaint[^1] in the United States District Court for the Northern District of Texas against the United States of America. This complaint seeks a refund of an employee retention credit (ERC), along with interest and reasonable costs and attorneys’ fees, asserting that its properly filed claims have remained unpaid by the Internal Revenue Service (IRS). The case highlights significant concerns among taxpayers and tax professionals regarding the processing delays of ERC claims by the Service.

Understanding the Employee Retention Credit Framework

The Employee Retention Credit was established in response to the COVID-19 pandemic, initially through the Coronavirus Aid Relief and Economic Security Act (CARES Act), passed on or about March 27, 2020. The CARES Act provided a credit against applicable employment taxes for eligible wages paid between March 12, 2020, and December 31, 2020, initially at 50 percent of up to $10,000 of qualified wages annually.

Eligibility for the ERC under the CARES Act was met if a business’s operations were either:

Fully or partially suspended due to a government order (Suspension Order Method) in any calendar quarter.
Experienced a significant reduction in gross receipts (Gross Receipts Test). For 2020, this meant gross receipts were less than 50% of the gross receipts for the same quarter in 2019. Eligibility under this test continued until the second quarter in which gross receipts were more than 80% of the gross receipts for the same quarter in 2019.

Subsequent legislation expanded and modified the ERC program:

The Consolidated Appropriations Act (CAA), passed on or about December 27, 2020, extended ERC eligibility through June 30, 2021. It also increased the credit amount to 70 percent of up to $10,000 of qualified wages per employee per quarter, a significant increase from the annual limit. The definition of a "Large Employer" also changed from more than 100 full-time employees to more than 500 full-time employees. (Note: Large employers could only use wages paid to employees to not work). Superior Pediatric Care, Inc. consistently employed less than 100 employees from 2019 through 2021, and always less than 500 employees, thus was not considered a large employer under either definition.
The American Rescue Plan Act (ARPA), passed on or about March 11, 2021, further extended the ERC through December 31, 2021, and included a carveout for financially distressed companies. For 2021, eligibility under the Gross Receipts Test required gross receipts for the quarter to be less than 80% of the gross receipts for the same quarter in 2019.

Claims for the ERC are generally made by filing Forms 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund.

Superior Pediatric Care’s Eligibility and Claim Details

Superior Pediatric Care, Inc. asserts its eligibility for the ERC through a combination of the Suspension Order Method and the Gross Receipts Test for various quarters between 2020 and 2021. The plaintiff paid qualified wages to its employees throughout these periods.

Q1 and Q2 2020 (March 31, 2020, and June 30, 2020): Plaintiff’s operations were suspended due to government orders closing public and private schools where it provides therapy services. Even when schools partially reopened online, the physical nature of occupational and physical therapy continued to be prevented by governmental orders. The plaintiff submitted an ERC claim of $3,150.49 for these quarters.
Q3 2020 (September 30, 2020): Plaintiff qualified under the Gross Receipts Test, as its gross receipts were less than 50% of the gross receipts for the same quarter in 2019, specifically a reduction of over 57%. The claim for this quarter was $17,329.46.
Q4 2020 (December 31, 2020): Although gross receipts were not less than 80% of the same quarter in 2019, the plaintiff continued to qualify under the Gross Receipts Test as this was the first 2020 quarter that did not maintain a 20% or greater reduction in gross receipts. The claim for this quarter was $26,479.32.
Q1 2021 (March 31, 2021): Plaintiff qualified under the Gross Receipts Test, with gross receipts less than 80% of the gross receipts for the same quarter in 2019. The claim for this quarter was $34,232.29.
Q2 2021 (June 30, 2021): Plaintiff elected to use its gross receipts from Q1 2021 compared to Q1 2019, demonstrating a decline to less than 80% of the comparable quarter. The claim for this quarter was $30,624.78.
Q3 2021 (September 30, 2021): Plaintiff’s gross receipts were less than 80% of the gross receipts for the same quarter in 2019. The claim for this quarter was $41,043.00.

The plaintiff states that it maintained adequate and accurate documentation to support its gross receipts determination for all claimed employment tax quarters. All employment taxes for the quarters at issue were paid prior to July 3, 2023. The Forms 941-X claiming refunds for these ERCs were filed on or about July 3, 2023, totaling $356,859. The claims for the specific quarters were received by the Service on or about September 12, 2023.

The IRS Response and Taxpayer Frustration

A critical aspect of the complaint, and one that resonates with many practitioners, is the significant delay and lack of communication from the IRS regarding ERC claims. On or about September 14, 2023, the IRS announced a moratorium on all ERC claims, citing concerns about inaccurately filed claims. This moratorium was set to last at least through the end of 2023. Following this, on or about October 19, 2023, the Service announced a special withdrawal process for employers concerned about the accuracy of their filed claims, allowing them to avoid future repayment, interest, and penalties.

However, as of August 10, 2025, the date of this complaint’s filing, some ERC claims are still not being paid by the Service, despite the moratorium having ended. The plaintiff notes that the Biden administration has stated that the rate of paying claims would be slower than before the moratorium as a means to prevent fraud.

A significant concern raised is the reduction in the number of employees processing ERC claims. The complaint alleges that, based on news reports related to actions impacting the IRS and the Department of Government Efficiency (commonly known as DOGE), the number of employees dedicated to ERC claims has been significantly reduced since the Trump administration was sworn in. The plaintiff asserts that while funds for ERC claims remain approved by Congress and are being processed by the executive branch, the speed of processing with the smaller staff is unclear.

This situation has led Superior Pediatric Care, Inc. to believe that, "through no legal fault of Plaintiff has been unpaid by the IRS and for which the Plaintiff reasonably believes may not be paid for years, if ever, unless the Plaintiff files this litigation". As of the filing date, the plaintiff had not received payment of any refund claim nor any correspondence from the Service regarding the processing or payment of its claims. This compels the plaintiff to seek judicial intervention to obtain its rightful refund.

Legal Basis for the Refund Claim

Superior Pediatric Care, Inc. asserts that the District Court has jurisdiction over this matter as it is a claim against the United States brought under federal law. Specific jurisdictional statutes cited include 28 U.S.C. §§ 1331, 1340, 1346(a)(1), and I.R.C. § 7422 for civil actions for refund. Venue is proper in the Northern District of Texas because the plaintiff’s principal place of business is in Fort Worth, Texas, within that district.

The plaintiff’s legal standing for the refund claim is rooted in its compliance with statutory requirements for filing a refund suit. I.R.C. § 7422 permits civil actions for refund, and I.R.C. § 6532 specifies limitations periods for such actions. The plaintiff states that it timely filed its claims via Forms 941-X within the two years of payment, as specified in I.R.C. §§ 6511 and 6532. Crucially, the complaint asserts that more than six months have elapsed since the plaintiff timely filed its claims (on or about July 3, 2023), and the IRS has not notified the plaintiff that its claims were allowed. This six-month waiting period, as prescribed by I.R.C. § 6532(a)(1), is a prerequisite for initiating a refund suit. Having met these requirements, Superior Pediatric Care, Inc. maintains it has satisfied the conditions precedent for litigation.

Demands for Relief: Refund, Interest, and Fees

Based on the foregoing, Superior Pediatric Care, Inc. is seeking several forms of relief from the Court:

Refund of Employee Retention Credit: The core of the complaint is the demand for a judgment in the amount of $356,859, representing the total unpaid ERC for the employment tax quarters ending June 30, 2020, September 30, 2020, December 31, 2020, March 31, 2021, June 30, 2021, and September 30, 2021. The plaintiff asserts it is the sole owner of this claim and has made no assignment.
Interest on Overpayment: Pursuant to I.R.C. § 6611, interest is allowed and paid upon any overpayment of internal revenue tax at the established overpayment rate. Such interest accrues from the date of the overpayment until a date preceding the refund check by not more than 30 days. Given that the plaintiff’s ERC refunds remain unpaid, it is statutorily due interest from the date of the overpayments until payment is made.
Attorneys’ Fees and Costs: The plaintiff also seeks an award for reasonable administrative and litigation costs, including attorneys’ fees, under I.R.C. § 7430. This section allows for the award of costs to a prevailing party in administrative or court proceedings related to tax determination, collection, or refund. By filing this complaint on August 10, 2025, in connection with its refund request, the plaintiff asserts its entitlement to these costs.
Other Relief: The plaintiff also requests any other relief to which it is entitled at law or in equity.
Jury Trial: Superior Pediatric Care, Inc. has demanded a jury trial for all issues triable by a jury pursuant to Federal Rule of Civil Procedure 38(b).

The complaint by Superior Pediatric Care, Inc. serves as a stark reminder of the challenges taxpayers face in receiving their rightful ERC refunds amidst IRS processing backlogs and policy shifts. For tax professionals, this case underscores the importance of meticulously documenting eligibility, filing claims timely, and understanding the legal avenues available when administrative remedies prove inadequate or excessively delayed.

Prepared with assistance from NotebookLM.

[^1]: Complaint, Superior Pediatric Care v. United States, Northern District of Texas, No. 4:25-cv-0853, August 10, 2025