The IRS Office of Chief Counsel has published a general legal memo clarifying prior guidance to confirm that general supply chain disruptions alone do not justify a claim for the employee retention credit (ERC) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Some tax advisors tell businesses they are eligible to claim the ERC if their business suffered as a result of general supply chain disruptions. This new legal memo clearly states this is not the case. Because this is an entity-level tax, businesses should exercise caution in an M&A entity deal if the acquired company received the ERC due to supply chain disruptions. The IRS could claw-back the credit on a subsequent audit.