On July 21, 2023, the IRS released a memorandum from the IRS Office of Chief Counsel that says employers who were faced with supply chain disruptions during the COVID-19 pandemic but were not ordered to shut down are not eligible for the IRS Employee Retention Credit.
The memo states that a supply chain disruption in and of itself does not rise to the level of a full or partial suspension of operations to be eligible to claim the Employee Retention Credit unless a government order was in place that mandated a shutdown. If a business experienced delays in receiving critical goods or supplies during the Coronavirus pandemic must be able to prove that there was a government order in place at the time which forced a business or their suppliers to suspend operations.
The IRS went on to say that once any government orders in place were lifted, the Employee Retention Credit should not be claimed simply because an employer struggled with residual disruptions from the order.
While IRS memorandums cannot be considered precedent, this indicates the position the IRS intends to take in Employee Retention Credit audits and suits.
As we always say here at Bryson Law Firm, LLC, tax matters are legal matters. If you're interested in exploring whether your business is legally eligible to claim any ERC credits, hire Bryson Law Firm, LLC today.