A Columbus fintech company quadrupled revenue since the creation of a pandemic-related tax credit that it helps employers claim.
Arvo Tech, renamed last month from Clarus Solutions LLC, automates the data collection and filing for dozens of employment-related tax credits for some 350 largely blue-collar small and mid-size businesses. Two of the largest are federal: a credit for hiring members of disadvantaged groups such as people who have disabilities, were previously incarcerated or spent a long time receiving public assistance, and one for retaining certain employees despite Covid-19 related closures or declining revenue.
"The folks that it's helping to get jobs are helping our clients see that they're really helping the community, the individual – and obviously the business, with the tax credit," President Terracina Maxwell told Columbus Inno. "It's a feel-good… tax credit."
A former sister company, Clarus R&D Solutions LLC, was acquired in September by publicly traded TriNet Group Inc. for $48 million cash, according to the California company's annual report. The acquisition price was not previously disclosed. R&D served mainly tech company clients.
Brent Johnson, who spun both software companies out of his accounting firm Clarus Partners (itself acquired by the firm Blue & Co.), said Arvo could make an attractive acquisition target too.
"We suspect at some point one of the larger payroll platforms will be looking for an employment tax credit solution," Johnson said.
Arvo recently hired Todd Fox as vice president of technology. Previously in the same role at Drive Capital-backed AI startup Mantium, Fox has had several IT and engineering leadership roles in Central Ohio, including six years with Enlace Health (also in the Drive portfolio) and a year at Quantum Health Inc.
Fox replaces Adam Winter, who had led technology for both Clarus spinouts but joined TriNet with the acquisition of R&D.
Based at 1500 Lake Shore Dr. off Dublin Road, Arvo added 10 jobs last year for a total of 45 employees.
Founded in early 2014, Arvo has helped employers collect a cumulative $575 million in credits. Revenue, a percentage of credits collected, is not disclosed. The company raised $3 million from outside investors when it started but has bootstrapped since then.
Maxwell was previously at Big Four accounting firm EY, which focuses on the Work Opportunity Credit for very large employers, created to help get people receiving public assistance into jobs. Shortly after she joined Johnson's firm, IRS rule changes allowing for electronic screening of hires made it more practical for small to medium businesses to seek it.
At first it was still a largely manual process, Maxwell said, but Arvo has built its tech to automate more steps – such as integrating the screening into the company's payroll or applicant tracking software.
Congress created the potentially more lucrative Employee Retention Credit in 2020 and expanded it the following year. There are a long series of requirements related to pandemic-related drops in revenue in 2020 and '21, and there are rolling deadlines through January 2025 to file amended returns to claim the credit for certain quarters. However, the IRS has warned against scammers seeking information from businesses purportedly so they can claim the credit.
"As we continue to build out the technology, we add more state and local tax credits to it," Maxwell said. "The goal is to create something that helps small business owners sleep at night because they're taking advantage of all the tax credits available to them."
The name change was one requirement of the R&D acquisition. Arvo is the Finnish word for "value."
"We also just like the sound of it," Maxwell said.
