ERC and Government shutown order

My understanding is that if a nonessential business was ordered to shutdown by a governor's order but the business could and did continue its business by video conferencing and employee telecommuting, that the business is not considered partially or fully suspended. Notice 2021-20 mentions this in question 15 and answer 15 on page 30 and Example 1 on page 31.

I have a nonessential-business client that kept working throughout the shutdown order by having employees work from home and using telephone or video conferencing to interact with customers. The revenue change did not qualify it for ERC and I don't believe the government shutdown does either based on Question 15, Answer 15 - Example 1.

Am I correct or has there any other changes to the IRS's position on this issue?

Example 1: Employer C, a software development company, maintains an office in
a city where the mayor has ordered that only essential businesses may operate.
Employer C’s business is not essential under the mayor’s order, and therefore Employer
C is required to close its office. Prior to the governmental order, all employees at the
company teleworked once or twice per week, and business meetings were held at
various locations. Following the governmental order, the company ordered mandatory
telework for all employees and limited client meetings to telephone or video
conferences. Employer C’s business operations are not considered to be fully or
partially suspended due to the governmental order because the employer is able to
continue its business operations in a comparable manner

https://www.irs.gov/pub/irs-drop/n-21-20.pdf

You are correct - not eligible.

In the example, they already used teleconferencing and telecommuting prior to the government order and the employer was able "to continue its business operations in a comparable manner." I would interpret this to give some wiggle room and would try to determine if your client continued operations in a "comparable manner."

Just so I am clear, in the scenario presented above, no quarter in 2020 experienced a 50% or more revenue drop. If the employees worked the same hours from home during the shutdown, a decline in revenue is not even considered in determining whether there was a partial shutdown.

Is that correct?

You would need to claim under Q&A 16's argument, or if you could make a 'more than nominal' argument if a specific type of business declined or was suspended because it wasn't feasible or was heavily impacted by the move to telework along the lines of Q&A 18. Depends a lot on what kind of business. Sales, probably not. Physical therapy, probably. Mental therapy? Who knows.

I am working with a Church that was subject to a legitimate government order banning gatherings of 10 or more people for two months in 2020, followed by a 50% capacity limitation. The 50% limitation was in effect for three months, then increased to 75%. They suspended in person services during the entire time, and streamed services online. Revenue did not decline by a significant amount.

My thinking is that the offering of in person services is their main line of business along with all of the other gatherings such as sunday school, choir, etc. The offering of an online substitute was more than a nominal effect. Certainly during the period when gatherings of 10 or more were not allowed. Less so during the 50% capacity limitation, and even less so during 75%.

What I am wrestling with, is how aggressive a position should I support? Its their decision, but I have to sign the 941X as preparer.

No idea. Claims over $200k (or was it 300k?) are automatically subject to audit after the IG office got involved though.

We prepared some claims for private schools that were under a 50% capacity order for over a year. At the time it seemed obvious , but with some of the Q&A I'm a bit afraid they'll decide it doesn't qualify due to remote learning despite neither of them employing remote learning in any way beforehand.

You would need to claim under Q&A 16's argument, or if you could make a 'more than nominal' argument if a specific type of business declined or was suspended because it wasn't feasible or was heavily impacted by the move to telework along the lines of Q&A 18. Depends a lot on what kind of business. Sales, probably not. Physical therapy, probably. Mental therapy? Who knows.

This client is the service/consulting industry where business is conducted by telephone, conference call, zoom, or in person. They are a cash-basis taxpayer but during the shutdown quarters (1st and 2nd 2020) their revenues declined by less than 10% on an accrual basis so they were still producing revenues at almost a normal pace during that time period.

This ERC issue in general is a very thorny one. A potentially substantial refund awaits an eligible taxpayer yet there seems to be so many shades of gray in determining its eligbility.

Arguing a 10% impact for a consulting firm would be very hard. Extra hard if they regularly used various forms of teleconferencing before hand.

I just had a client inquire about this. Ugh, I thought I was going to bypass it!

Same here. I figured this is a payroll thing, so I am off the hook. But there are many firms out there that are cold calling every business and telling them that they are entitled to $$$ and need to amend. I am also having to orient to this. I don't want my clients to get pulled into something fraudulent, but I also don't want to advise them that they don't qualify if they do.

Do we have a resident expert on this subject I may be able to refer out work to? I really do not feel like engaging in this between identifying if a business qualifies and amending to claim vs. qualified payroll expenses vs. PPPL, blah blah blah...

Finding someone like that would be a valuable resource. I'd be interested as well. Anyone?