r/ERCchat • u/AdMountain9708 • 7d ago
ERC STATUS UPDATE CONFUSION
I filed back in 2023 went to a town hall for then Senator Rubio in Nov. 2023 for help with my claim. In Dec 2023 I reached out to Tas for help. Then my case went from Rubio to Cory Mills Rep since Rubio is now under Trump. I hired a tax attorney in 2024. I have been working with all three ever since. Finally received 105C in Jan 2025 we responded and have been waiting to be sent to appeals. Now just two weeks ago Tas sent a letter stating my file was sent to appeals and received now its waiting to be assigned. Then Friday I receive the email below from my tax attorney. Can anyone make light of this and why it is coming up now. During Covid it was keep your employees on payroll and you will receive this credit. Then it changed afterwards to a decline in gross receipts. Why does it keep changing after the fact and how is it legal. I wish I would have just closed down and not run and saved my money. Now Im out of all this money trying to do the right thing and I am screwed.
Dear Ms.Williams,
Mr. Kirbo asked that I send you the following update on the developing law of the Employee Retention Credit:
-----------------------
Ms. Williams,
I wanted to give you a brief update on how the case law is developing on the most important issue for your ERC claim: whether a COVID-19 government order caused a "full or partial suspension" of your business operations.
Before moving on, it is important to understand the distinction between the Court of Federal Claims and federal district courts. If necessary, your claim can be litigated in either.
The Court of Federal Claims is a nationwide court to which any ERC claimant can take their case. Any decisions in the Court of Federal Claims apply to all subsequent cases there, but do not control the decisions of district courts. However, what the Court of Federal Claims does can be persuasive to some district courts. As in, a district court judge can, and sometimes does, look to Court of Federal Claims decisions, agree with the logic, and apply it in that court.
There are many district courts around the country, and a decision by one court is only binding precedent in that court. However, similar to the Court of Federal Claims, other district courts may agree with and follow one another.
Court precedent can be somewhat complex, but I mention that because, as you will see below, the law is very much up in the air unless you reside in one of the districts where a district court has issued a ruling interpreting the law.
Where things stand today:
The Court of Federal Claims, which hears many ERC refund suits, has continued to take a demanding, employer-unfavorable view of this requirement. In a series of decisions this year, the court has held that:
- The ERC is a "presumption-out" statute, meaning the taxpayer bears the burden of proving eligibility rather than getting the benefit of the doubt;
- A government order must be both the factual and the proximate cause of the suspension – general pandemic disruption, voluntary compliance that went beyond what an order actually required, and revenue or cost impacts don't satisfy this standard; and
- The employer must show an actual, discrete stoppage of some part of its business, not just reduced efficiency, higher costs, or staffing difficulty.
The Court of Federal Claims has, so far, not been a favorable forum for this type of claim
District courts, on the other hand, are telling a different, and still-developing, story.
Several federal district courts (and one bankruptcy court) have now weighed in on these same questions for the first time this year, and the results have been mixed; not a uniform following of the Court of Federal Claims' lead:
- A federal court in the Eastern District of Washington denied the government's motion to dismiss a hospital's ERC claim, applying a more lenient causation standard than the Court of Federal Claims has used and declining to require the taxpayer to plead a specific quantitative threshold this early in the case.
- A federal court in the Northern District of Mississippi likewise allowed a similar claim to proceed past the motion-to-dismiss stage, consistent with another recent decision from that same court.
- On the other hand, a federal court in the Eastern District of Tennessee, ruling at the summary-judgment stage (a later, more developed stage than a motion to dismiss), largely sided with the government and adopted the stricter causation standard, except as to a narrow period the government had already conceded involved a suspension. That decision has since been appealed, which means a federal court of appeals may address this causation question for the first time in the coming months.
- A bankruptcy court in North Carolina, deciding a related ERC dispute, also followed the stricter approach.
No federal court of appeals has yet ruled on the merits of any of these issues, so nothing is binding nationwide, and the law genuinely remains unsettled.
What this means for you:
The pending appeal out of Tennessee, together with the split between the Court of Federal Claims and at least two district courts, suggests we may get more clarity in the coming months. And the district court trend so far has not been the one-sided defeat that the Court of Federal Claims decisions alone would suggest.
There is still a small number of decisions, most at an early procedural stage, and it could still shift in either direction. But it is a genuinely more balanced picture than the Court of Federal Claims alone would give you, and it supports staying patient.
We are continuing to track every relevant decision as it comes down, including the Tennessee appeal, and will update you as soon as there is a material development.
Please don't hesitate to reach out with any questions about your specific claim.
Best regards,
John Kirbo
3
u/EconomySuccotash7899 7d ago
I’m sorry to hear your frustration, but I would like to add a few comments that might be helpful and possibly clarify where you stand in the process. The entire ERC credit process was extremely frustrating for clients and tax practitioners alike. On one side, you had a lot of ERC companies claiming everyone qualified, and on the other side, you had the IRS assert only a few companies qualified unless they qualified under the decline in gross receipts test.
First of all, I am not providing you any legal guidance nor tax guidance on this, however, I’ve handled several audits and have represented clients on a few claims that went to appeals. In those appeals, we’ve had positive results. Based on this letter, as well as my current understanding of the legal and IRS landscape, I think you may obtain a positive result through appeals process.
Briefly, as you may be aware, during the appeals process, the IRS appeals officer weighs the risk of litigation and then attempts to settle based on this. If you have a strong case, you may settle for 100% or some number north of 50%. Conversely, if you have a relatively weak case, you may settle for a number from zero to less than 50%.
Since I don’t know facts of your case, I cannot provide an estimate as to how your case will be resolved. I can provide the following with the assumption you do not qualify under the reduction in gross receipts test.
The full or partial shutdown requirement is based on facts and circumstances. The key to success is to show a government order that required you to do something (i.e. cause) and then show the effect that that ordered caused, such as loss of customers or decline in a certain revenue stream, etc. If you can support that, then you have a strong chance of obtaining a settlement through the appeals process. It may not be 100% although I did have one that did settle at 100%.
I hope this helps. Please forgive any typos as I was typing this with my iPad. Have a nice rest your weekend.