Definition of Suspending Operations for ERC

[Anonymous]

<p class=”_1qeIAgB0cPwnLhDF9XSiJM”>I can’t seem to wrap my head around the ERC rules for determining when a business has fully or partially suspended operations (and thus is eligible for the ERC without having to show a 50% drop in gross receipts for 2020 quarters).</p>
<p class=”_1qeIAgB0cPwnLhDF9XSiJM”>Most of my clients are here in California, where we’ve been subject to Shelter-in-Place, Limited Stay-at-Home, and Regional Stay-at-Home orders, to say nothing of city orders. Is there any sort of rule or safe harbor that any of these orders qualify for a non-essential business to prove a partial/full suspension of operations? It seems like this will be a nightmare for enforcement a year or two from now when everyone is trying to come up with documentation of partial suspensions of operations.</p>
In other words, is there a quasi-safe-harbor where a shutdown order (or some other order we’ve seen) counts for non-essential businesses, without having to figure out a way to prove a suspension in operations down the road?

Here are some examples I’m seeing where I could probably argue both sides:

• Tour operator who used Jeeps and vans to transport clients. They reduced capacity to maintain social distancing.
• Attorney who had numerous court dates cancelled due to COVID-related courtroom closures.
• Logistics operation that reduced headcount to spread staff out.

Aside from the attorney, the other two are not considered essential businesses and want to take the credit.

Any help (beyond the FAQ on the IRS website) would be appreciated!

[Diane White]

The IRS has an FAQ page specifically for this topic. Since FAQs are not permanent I suggest printing the information.

COVID-19-Related Employee Retention Credits: Determining When an Employer’s Trade or Business Operations are Considered to be Fully or Partially Suspended Due to a Governmental Order FAQs | Internal Revenue Service (irs.gov)

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