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Letter decoder

Paste the explanation from your IRS letter, or tick the sentences it uses. The decoder tells you which of the fourteen grounds each sentence states, what the public record shows about it, and what the United States said about the same point when a court was listening.

Go to the decoder Read the fourteen grounds

In plain terms: if your Employee Retention Credit claim was decided against you, the IRS sent one of two letters. Letter 105C says the whole claim was refused; Letter 106C says part of it was. The letters draw on a small set of recurring sentences. This page quotes each one exactly and sets beneath it the public record and what the United States told two federal courts about the same question. It also states, as public law, what the letter starts: a two-year period to bring a refund suit, which a request for an appeal does not extend. This is public law and public record, not legal advice.

What the letters are

Letter 105C is the Service's notice that it has decided a claim for refund against the employer for the quarter it names; the Service titles it "Disallowance of the Employee Retention Credit." Letter 106C, "Claim Partially Disallowed," is the notice that part of a claim was decided against the employer.1 Form 886-A, Explanation of Items, is the examiner's narrative attached to an examination report; in the Ninth Circuit record of Stenson Tamaddon, LLC v. IRS, No. 25-4217, Forms 886-A decided claims on the ten percent figure of Notice 2021-20 (the "Notice").2 The 2024 letters issued without examination: the National Taxpayer Advocate reported that "the IRS did not subject disallowed ERC claims to an examination; rather, the IRS conducted a risk-scoring analytic process."3 The Service's own Letter 105C page names what proves the suspension test: "A copy of each government order that you believed caused a suspension of your operations, with the specific provision(s) highlighted."4 The Library and the record builder follow that structure.

The sentences and the record

Seven sentences recur. Each is quoted as the Service writes it; beneath it stand the public record and the position of the United States (the Government as litigant) in Stenson Tamaddon and in Tri-State Memorial Hospital v. United States, No. 2:25-cv-0181-TOR, ECF No. 38 (E.D. Wash. May 28, 2026) ("Tri-State"). Positions are numbered as on the United States' own words; the filings are identified in the note.5

1. No orders in effect

Our records indicate there were no government orders related to COVID-19 in effect during the quarter(s) you claimed ERC which could have fully or partially suspended your trade or business.6

The record answers the sentence: the six quarters list the orders in force. The United States told the District Court that the qualifying instruments are "orders, proclamations, or decrees from the Federal government or any State or local government" (GP-29, Doc. 44 at 12) and that "one would hope that the IRS is indeed evaluating ERC claims consistent with the explanations it has offered the public" (GP-22, Doc. 44 at 24 n.4); its counsel described "a closer look at every single claim" (GP-27, Tr. 16:9-10; see also GP-21, GP-26, GP-30). A form sentence is not that examination.

2. The ten percent figure

[The employer] did not substantiate how ... modifications resulted in the Taxpayer's reduction in their ability to provide services in the normal course of business of not less than 10 percent to fall within the provisions of Notice 2021-20.7

The United States told the District Court that "[e]ffectively, this is a safe harbor ... it isn't an eligibility requirement" (GP-12, Doc. 44 at 14; see also GP-11, GP-13, GP-14) and told the Ninth Circuit that the provision is "a safe harbor rather than a hard floor" (GP-16, Br. for Appellees at 49; see also GP-15, GP-17, GP-18). The Tri-State court held that the Notice "provides a method for the test to be met not as a requirement to meet the test" (GP-55, Tri-State at 16). A claim decided on the figure is decided on a requirement the United States has said does not exist.

3. The Notice as governing law

Notice 2021-20 governs the ERC for all periods.8

The United States wrote that the Notice "is merely guidance" and "lacks the force of law" (GP-01, Doc. 44 at 19), that "[w]hether Notice 2021-20 exists or not, the statute will control whether a refund is warranted" (GP-02, Doc. 44 at 24; see also GP-03, GP-05, GP-06, GP-07, GP-57). The District Court held that "the Notice carries no force of law and is entitled to no deference" (Doc. 49 at 27). The statute governs the ERC for all periods; the Notice governs the Service.

4. The "essential" designation

[The employer] was considered an essential business under a governmental order [and therefore was not suspended].

The designation is the premise of the conditions the order imposed, not a finding that nothing was suspended. On the United States' own reading of Q&A-11, such an employer "may be considered to have a partial suspension of operations if, under the facts and circumstances, more than a nominal portion of its business operations are suspended by governmental order" (GP-20, Doc. 44 at 13; see also GP-29, GP-32), and the Tri-State court adopted that formulation and refused to read "significant" into it (GP-53, Tri-State at 9-11). A workplace open for some purposes and closed for others is partially suspended.

5. "Recommendations"

[Operations] were only subject to modification due to recommendations made by governmental entities.

Every instrument in the Library carries its enforcement provision beside its operative words; an instrument with a penalty clause is not a recommendation. The United States described the qualifying instruments as "orders, proclamations, or decrees" (GP-29, Doc. 44 at 12; see also GP-30, GP-31), and the Tri-State court held that "the required protocols and procedures to comply with the Proclamation" were caused by the order, not the virus (GP-56, Tri-State at 20-21).

6. "Modifications"

If you changed business practices to alter behavior, such as making store aisles one-way or requiring customers or employees to wear masks, we won't consider that change to have had a more than a nominal effect on your business operations.9

The United States told the District Court that "employees having to wear face masks may impact business operations" and that orders on "operational hours, space, etc." are "considered" (GP-31, Doc. 44 at 30; see also GP-32), and told the Ninth Circuit that "nominal" means "de minimis" (GP-17, Br. for Appellees at 35). Compelled capacity, distancing, screening, isolation and testing rules were not de minimis, and the Tri-State court held such protocols to be suspensions the order caused (GP-56).

7. Supply chain

A supply chain issue by itself does not qualify you for the ERC. ... narrow, limited exception ... absolutely could not operate without the supplier's product.10

The United States quoted the supplier rule to two courts without those words (GP-49, Doc. 44 at 13 n.3, 15; see also GP-19), telling the Ninth Circuit that the rule "never even mentions a 'physical[ ] clos[ure]' order against the supplier" (GP-33, Br. for Appellees at 41 & n.5). In Tri-State it agreed that "due to" means "because of," and the court held that "due to" requires but-for causation (GP-50, Tri-State at 17, 19). "Narrow," "limited" and "absolutely could not operate" appear in none of those filings and in no statute.

What the letter starts

The letter starts a period fixed by statute. Under I.R.C. § 6532(a)(1), a refund suit under § 7422(a) can be brought no earlier than six months after the claim was filed, unless the Service decides it sooner, and no later than two years after the date the Service mails, by certified or registered mail, its notice that the claim has been decided against the taxpayer; the Service's page states that "Requesting an appeal doesn't extend this time." The period is extended only by written agreement under § 6532(a)(2), made on Form 907 and effective only if the Service countersigns before the period expires; under § 6532(a)(4) reconsideration of the claim does not extend it. The taxpayer can request review by the IRS Independent Office of Appeals within the time the letter states; on April 27, 2026 the Service announced Notice CP320B, a streamlined Form 907 extension.11 In a refund suit the court decides the claim de novo on the statute and the evidence; in the United States' words, "the statute will control whether a refund is warranted."12

  1. IRS, "Understanding Letter 105-C, Disallowance of the Employee Retention Credit" (irs.gov, as updated Apr. 27, 2026); IRS, "If you receive Letter 106-C about the Employee Retention Credit" (irs.gov, Apr. 27, 2026) ("Letter 106-C, Claim Partially Disallowed, is your legal notice that we partially disallowed, or denied, your claim for the tax period stated in the letter."). A Letter 106C that decides the ERC in full while allowing another item is, as to the ERC, a Letter 105C. ↩
  2. Opening Br. for Plaintiff-Appellant at 8, 11, 43, Stenson Tamaddon, LLC v. IRS, No. 25-4217 (9th Cir. Sept. 17, 2025), DktEntry 11.1 ("Opening Br.") (quoting the Service's statements in the excerpts of record at 3-ER-364 ("Notice 2021-20 governs the ERC for all periods") and 3-ER-391 ("[t]o the extent that legislation did not modify the original provisions of the ERC, Notice 2021-20 governs the ERC for all periods"), and quoting and citing 3-ER-396, a Form 886-A that decided a claim because the employer "did not substantiate how ... modifications resulted in the Taxpayer's reduction in their ability to provide services in the normal course of business of not less than 10 percent to fall within the provisions of Notice 2021-20"); see also Opening Br. at 12 (quoting 2-ER-102, a Service letter that relied on the same figure). ↩
  3. Nat'l Taxpayer Advocate, blog of Aug. 21, 2024 (also: some letters carried "incorrect explanations of the basis on which the IRS denied the claim"); Nat'l Taxpayer Advocate, blog of Apr. 27, 2026 (the 2024 letters were "based on the results of risk filter analyses rather than a prior examination"). The Service announced more than 20,000 Letters 105C on December 6, 2023 and 28,000 more on August 8, 2024, acknowledging that some "inadvertently omitted a paragraph highlighting the process for filing an appeal." IRS, IR-2023-230 (Dec. 6, 2023); IRS, IR-2024-203 (Aug. 8, 2024) (letters to claims that "showed a high risk of being incorrect"; "more than 90% of disallowance notices were validly issued"); Nat'l Taxpayer Advocate, blog of May 8, 2025 (letters on about 84,000 returns "partially or fully disallowing the claims"). ↩
  4. IRS, "Understanding Letter 105-C, Disallowance of the Employee Retention Credit" (irs.gov, as updated Apr. 27, 2026; read July 21, 2026). The page's second and third items are "A written explanation of how each government order fully or partially suspended your business operations during the quarter at issue" and business records "that discuss or demonstrate that the government order you relied upon fully or partially suspended your business operations." ↩
  5. "Doc. 44" is the United States' Opp'n to Mot. for Summ. J. & Cross-Mot. for Summ. J., Stenson Tamaddon, LLC v. IRS, No. 2:24-cv-01123-SPL (D. Ariz. Jan. 6, 2025), ECF No. 44 (pins are ECF header pages); "Doc. 49" is the summary-judgment order of June 20, 2025, ECF No. 49; "Tr." is the Reporter's Tr. of Prelim. Inj. Hr'g of July 16, 2024 (pins are page:line); "Br. for Appellees" is the Brief for the Appellees, No. 25-4217 (9th Cir. Jan. 30, 2026), DktEntry 25.1 (pins are the brief's own pages); "Tri-State" pins are the order's own pages, which equal the ECF pages. ↩
  6. The Service's form language on the suspension prong in Letters 105C issued since 2024, recorded from a Service letter of October 18, 2024; see Opening Br. at 11-12 (record examples of letters and Forms 886-A deciding claims on the Notice, 2-ER-102, 3-ER-396). ↩
  7. Opening Br. at 11 (quoting 3-ER-396); see Office of Chief Counsel, IRS, Mem. AM 2023-007, at 12 (Oct. 18, 2023) (Ex. GOV-004) (the employer "needs to substantiate that the modifications resulted in a reduction ... of not less than 10 percent to fall within the provisions of Notice 2021-20"); id. at 1 ("This GLAM may not be used or cited as precedent."). ↩
  8. Opening Br. at 8, 11 (quoting the Service's statements in the excerpts of record at 3-ER-364 ("Notice 2021-20 governs the ERC for all periods") and 3-ER-391 ("[t]o the extent that legislation did not modify the original provisions of the ERC, Notice 2021-20 governs the ERC for all periods")). ↩
  9. IRS, Frequently Asked Questions About the Employee Retention Credit, "Qualifying government orders" (Ex. GOV-003, at 8). ↩
  10. IRS, Frequently Asked Questions About the Employee Retention Credit, "Qualifying government orders" (Ex. GOV-003, at 9). ↩
  11. I.R.C. § 6532(a)(1), (a)(2), (a)(4); I.R.C. § 7422(a); IRS, "Understanding Letter 105-C, Disallowance of the Employee Retention Credit" (irs.gov, as updated Apr. 27, 2026) ("Requesting an appeal doesn't extend this time"); IRS, Form 907, Agreement to Extend the Time to Bring Suit; Nat'l Taxpayer Advocate, blog of Apr. 27, 2026 (Notice CP320B; the streamlined Form 907 extension; an average of 337 days from appeal request to resolution in fiscal year 2025); IRS, Notice CP320B page (irs.gov). As of the week ending August 29, 2026 the Service reported "approximately 14,900 remaining ERC claims in various stages ... under review (1,650), pending payment or disallowance (2,950), under audit (3,600), awaiting review of disallowance responses (5,300) and, finally, with the Independent Office of Appeals (1,400)." IRS, ERC claim inventory page (irs.gov, page last reviewed Sept. 8, 2026). ↩
  12. Doc. 44 at 22-24 ("de novo judicial review of the merits"; "the statute will control whether a refund is warranted"); Lewis v. Reynolds, 284 U.S. 281, 283 (1932) (Ex. LAW-020) ("a redetermination of the entire tax liability"). ↩

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The COVID Project is a public reference on the law and the record, not legal advice. The dates and deadlines in your own letter, including the two-year period to bring a refund suit that the letter starts, are matters for a licensed professional who knows your facts. Nothing you paste here is stored or logged.