The partial or full shutdown qualification is based on a "suspension test" to demonstrate that your operations were partially or fully suspended due to a Covid-19 governmental order. Keep in mind, a government restriction may have had a direct impact on your operations even though that shutdown order wasn't given to you directly.
IMPORTANT: This qualification only applies during the period of the actual government order. Since there were very few government shutdown orders during 2021, this qualification mainly applies to 2020 quarters.
Please reference the IRS notices pertaining to suspension qualification: Notice 2021-23, Notice 2021-33 & Notice 2021-49
ERC Full or Partial Suspension Qualification Requirements
More than Nominal Impact - The partial suspension from a government order must have had a more than nominal effect, which means it affected more than 10% of business operations.
This impact can come from a reduction in business hours of 10% or more, or a suspension of your business operations that represented 10% or more of gross receipts as compared to 2019. (This DOES NOT mean that a 10% reduction in sales is required to qualify, but the order must have suspended at least 10% of your revenue producing operations.)
Hourly example: Government orders required a restaurant to close 2 hours early due to curfew requirements. The 2 hours represented 15% of the business working hours. This business qualifies for the period affected by the government order.
Gross receipts example: Government orders required a radiology clinic to stop elective procedures during Q2 & Q3 of 2020. The business reviewed their gross receipts for Q2 & Q3 of 2019 and determined that the suspended elective procedures represented 18% of their total gross receipts during those quarters. This business qualifies for these two quarters.
Inability to Convert to Telework - If the business was able to effectively convert to a remote work environment that mitigated the nominal impact on the business, they do not qualify for the suspension qualification.
Full or Partial Suspension IRS Examples
Example 1: An employer that operates an essential business is not considered to have a full or partial shutdown if government orders allow them to remain open. However, an employer that operates an essential business may be considered to have a partial suspension if more than a nominal portion of its business operations are suspended.
Example 2: The partial suspension qualification applies if employers could not obtain telework capabilities that allowed their business to operate as usual (adequate IT support etc). It also applies if the employee's work was not portable, or the presence of having an employee in the physical workspace plays a critical role.
Example 3: If an employer's workplace is closed due to a government order for certain purposes, but the employer's workplace may remain open for other limited purposes, the employer's operations would be considered to be partially suspended if more than a nominal portion of the business cannot be performed.
Example 4: A restaurant must close its on-site dining or every other table due to government orders but can still operate its drive thru or carry out service. This would be considered partially suspended.
Note: for any periods you qualify for you will be required to provide a brief description of the more than nominal effect on your business to substantiate your claim.
