An IRS legal memorandum makes it clear that the agency will not treat Occupational Health and Safety Administration (OSHA) communications as government shutdown orders for the purposes of claiming the employee retention credit (ERC). The Office of Chief Counsel (OCC) memorandum (AM 2023-007) is significant because many ERC consultants that have targeted ineligible businesses have taken the position that OSHA communications are considered government orders to suspend operations for the purposes of claiming the credit.
To qualify for the ERC, an employer must show its businesses operations were partially or completely shut down as the result of a governmental authority’s orders limiting commerce, travel or group meetings in response to COVID-19 and meet other conditions. The credit is available to employers that paid qualified wages to some or all employees after March 12, 2020, and before Jan. 1, 2022. The OCC memorandum addressed the question of whether an employer may rely on OSHA communications about mitigating and preventing the spread of COVID-19 in the workplace to qualify as an employer eligible to claim the ERC.
The OCC found that during the time an employer could be eligible to claim the ERC, OSHA produced guidance on pre-existing standards, the general duties of an employer to maintain a safe workplace, and nonbinding recommendations for employers. OSHA did not adopt or enforce any widely applicable rules that limited commerce, travel or group meetings due to COVID-19. Therefore, employers are not eligible for the ERC based on their following of OSHA recommendations or guidance.
OCC memorandums are drafted as internal advice for IRS attorneys and revenue agents and can’t be relied on by taxpayers. However, they do provide insights as to how the IRS might address a new or novel issue for which no other guidance is available.
