U.S. Supreme Court Ruling Invalidates IRS Restrictions on Employee Retention Tax Credit (ERTC) Program

Landmark Decision in Loper Bright Enterprises vs. Raimondo Strikes Down IRS ERTC Qualification Rules

San Diego, CA – A recent U.S. Supreme Court ruling has rendered IRS-imposed restrictions on the Employee Retention Tax Credit (ERTC) program irrelevant, making it significantly easier for businesses to qualify for substantial tax credits.

Tax attorney Skip Coomber states, “The IRS rules on the ERTC have been completely dismantled by the Supreme Court’s decision in Loper Bright Enterprises vs. Raimondo. This ruling effectively removes all IRS-imposed restrictions that previously limited eligibility for the credit.”

The Impact of the Supreme Court’s Decision

On June 28, 2024, the U.S. Supreme Court ruled in Loper Bright Enterprises vs. Raimondo, Secretary of Commerce, overturning the long-standing Chevron doctrine. The Court held that:

“The Administrative Procedure Act requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the law simply because a statute is ambiguous.”

This ruling effectively strips federal agencies, including the IRS, of the power to impose restrictions beyond those explicitly outlined by Congress.

How This Affects ERTC Eligibility

The CARES Act, signed into law on March 27, 2020, provided financial relief to businesses through the Paycheck Protection Program (PPP) and the Employee Retention Tax Credit (ERTC). The ERTC was specifically designed to reimburse employers for maintaining payroll during the COVID-19 pandemic.

Congress established two ways for businesses to qualify for the ERTC:

1. Gross Receipts Test – A comparison of quarterly gross revenue from 2019 to determine eligibility.
2. Government Orders Test – Qualification if business operations were fully or partially suspended due to a government order.

The IRS imposed additional restrictions on the Government Orders Test, including:

• Nominal Impact Test – The IRS required at least a 10% impact on operations to qualify. This threshold is no longer enforceable.
• Supply Chain Restriction – The IRS stated that supply chain disruptions alone did not qualify businesses. This restriction has been invalidated.

With these IRS restrictions eliminated, employers can now more easily qualify for up to $21,000 per 2021 W-2 employee under the Government Orders Test.

Next Steps for Employers

Employers that previously opted not to pursue ERTC claims due to the limitations of the IRS restrictions should now reconsider their eligibility. Consulting with a tax attorney specializing in ERTC claims is crucial to maximizing available refunds. 

About Our Firm:

We have assisted over 300 employers in claiming ERTC refunds, securing more than $300 million in Treasury checks. Contact us today for a consultation to determine whether you qualify for this substantial tax credit. 

Audit Risk?  Our clients have filed ERTC claims for over 1,500 quarters.  Only one quarter has been audited in the past three and a half years.  With our current .0007% audit occurrence, employers can take comfort that Coomber is processing ERTC claims the correct way. 

For further information or to schedule a consultation, please contact:

Skip Ralph Coomber, III, Esq.
Employer Tax Benefits Consultant
Your Trusted Advisor
Cal. State Bar No.: 150701
U.S. Tax Court Bar No.: CR25430
Coomber Consulting, LLC
M: 858-354-3910