I’ve tried this multiple times, and did all sorts of device look ups, etc. Turns out, this is a documented issue with Notes, on the Apple discussion board. The folder shortcut or tags shortcut will not work if Notes is open on another device. I have verified this. If I just make the normal shortcut, run it on my iPhone, it works. Try it on my iPad, it fails. then I close notes on my iPhone, and now the iPad works. Open Notes on my iPhone, now it fails on iPhone. Did the same process with my Mac. Turns out because of the way that iCloud Syncs shortcuts and actions, the Notes app does not allow it to work on 2 open devices at once.
https://discussions.apple.com/thread/255144490?sortBy=rank