"In my thought process the credit reduces the payroll expenses for those years which increases the net income. Which is taxable. What am I missing??? "

Youre not missing anything, youre correct, those prior year returns need to be amended to account for the credits they received....these ERC credit mills are just slamming out credits (and collecting HUGE fees) whether people really qualify or not and theyre not following up on the rest of what needs to be done.

Have you see these?  Prepare your clients now for the inevitable IRS audit that will follow at some point

https://www.irs.gov/newsroom/irs-opens-2023-dirty-dozen-with-warning-about-employee-retention-credit...

https://www.irs.gov/newsroom/to-protect-taxpayers-from-scams-irs-orders-immediate-stop-to-new-employ...