In plain terms: if you break your leg on June 30, you are not walking normally on July 1. The orders that closed dining rooms, emptied convention calendars, cleared dental schedules and sent offices home did not undo their own effects on the day the last of them lapsed. This page establishes three things. The statute asks whether your operation was suspended during the quarter because of the orders; it does not ask whether an order was still on the books that day. The IRS's own guidance, Notice 2021-20, says that an employer suspended for part of a quarter is eligible for the whole quarter, and that a suspension continues through the period an order's compelled changes take to reverse. And orders were in force on every day through September 30, 2021 in any event. The page closes by listing, instrument by instrument, what it does not claim was in force.
The proposition
An employer whose operation was suspended by orders in force on June 30, 2021 was not operating normally on July 1, 2021. That proposition rests on five lawful pathways, each grounded in statutory text, in a federal court's definitions, in the Notice's own words or in the orders' own terms, and this analysis states each in turn. First, in the Suspension Clause the phrase "during the calendar quarter" modifies "suspended," not "orders"; Congress did not write "orders in effect during the quarter," and the suspension an order caused continues, because of that order, for the period its compelled dismantling took to reverse. Second, Tri-State Memorial Hospital v. United States defines suspension to include "delay" and holds that "due to" is but-for causation, so a delay that would not have occurred but for an order is a suspension due to that order whether or not the order was still in force on the day the delay was felt. Third, the Notice's Q&A-22 makes an employer suspended during part of a quarter eligible for the whole quarter, and its Q&A-16(4) recognizes that a suspension persists through an "adjustment period" after an order operates. Fourth, the restoration period each class of employer needed is fixed by the orders' own phase steps and sunset dates, and it is stated here from those dates alone. Fifth, and independently, orders were in force in every quarter through September 30, 2021.
This analysis never says that an expired order suspended anyone by its own force. It says that the suspension the order caused continued because of it, it states the restoration period from the orders' own phase steps and sunset dates, and it lists the orders that were in force. Stated plainly, an employer whose operation was ordered suspended through June 30 was not walking normally on July 1.
The sentence this page answers
The letters of the Internal Revenue Service (the "Service") state the point in one sentence.
"The orders had lifted before the quarter began; any effect was a lingering effect."
Form language of the Service's letters and Forms 886-A on the suspension prong
For the third quarter of 2021 the premise is factually incorrect: federal orders were in force on every day of the quarter, statewide indoor masking and exposure-control orders in eight jurisdictions, health-care-worker vaccination orders in sixteen States and the District, and orders in more than thirty metropolitan jurisdictions, each listed under the fifth pathway below. The phrase "lingering effect" describes a quarter with no orders; the Federal Register for July, August and September 2021 records a quarter in which they had not ended. And the statute's word is "suspended." A court has held that a suspension is "[t]he act of temporarily delaying, interrupting, or terminating something," so a delay is a suspension; where the orders of five quarters dismantled a function and their own last steps, taken between March 10 and July 1, 2021, permitted its restoration only on a timetable the orders fixed, the delay in restoring the function during the third quarter was caused by the orders. But for the orders, no restoration was needed.
The first pathway: the grammar of the Suspension Clause
The clause reads: "the operation of the trade or business ... is fully or partially suspended during the calendar quarter due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings ... due to the coronavirus disease 2019 (COVID-19)."1 The subject of the sentence is "the operation of the trade or business"; the predicate is "is fully or partially suspended during the calendar quarter"; the cause is "due to orders." "During the calendar quarter" is an adverbial phrase attached to the verb "suspended"; it fixes when the suspension must exist, not when the order must be in force.
Congress knew how to write a temporal condition on the order if it had wished to. It wrote one on the wages ("wages paid after March 12, 2020, and before January 1, 2021") and one on the gross-receipts comparison ("the same calendar quarter in the prior year"), and it wrote none on the order.2 "[W]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion."3 Reading "in effect during the quarter" into the phrase "due to orders" asks a court "to add words to the law to produce what is thought to be a desirable result. That is Congress's province."4
The Service's own Chief Counsel memorandum AM 2023-005 frames the question as whether a lifted order "constitute[s] a governmental order in subsequent calendar quarters." That is the wrong question. The statute asks whether the operation was suspended during the quarter due to orders, and a memorandum that by its own terms "may not be used or cited as precedent" cannot rewrite the clause's grammar. The scenarios in AM 2023-005 stipulate their conclusions (a jurisdiction that "lifted all orders related to COVID in May 2020"); no State in the Library fits them.5
The second pathway: Tri-State's "delay" and but-for causation
A "suspension" is "[t]he act of temporarily delaying, interrupting, or terminating something," or "[t]he state of such delay, interruption, or termination." That is the definition both parties agreed and the court adopted in Tri-State, which went on to hold that "a 'partial suspension' is a temporary delay, interruption, or termination of a portion an employer's business. The language is plain."6 A delay is a suspension.
"Due to" means "because of," and "because of" is but-for causation. The Supreme Court's instruction is mechanical: "a but-for test directs us to change one thing at a time and see if the outcome changes. If it does, we have found a but-for cause."7 Change one thing. Had no order closed the dining room in March 2020, capped it at 25 percent in May, 50 percent in June and 25 percent again in December, and lifted the last cap on May 29, June 11, June 15, June 22 or June 30, 2021, the dining room would have been staffed, stocked, booked and open on July 1, 2021. It was not, because of those orders. The staff the order compelled the employer to lay off or reassign, the appointments the order compelled it to clear, the supply contracts the order compelled it to cancel, the inventories the order compelled it to run down, the events the order compelled it to withdraw from and the capacity the order compelled it to dismantle were not restored on the day the last step took effect. The delay in restoring them is a suspension, because Tri-State says delay is suspension, and it is due to the order, because but for the order no law required the dismantling.
The United States argued in Tri-State that the hospital would have taken its steps regardless of the order, because the illness and not the Proclamation was the cause. The court answered that "the required protocols and procedures to comply with the Proclamation" were caused by the order, and that on the United States' theory "there are not many businesses or any business that would be eligible under the ERC at all."8
The third pathway: the Notice's own recognition
The Notice reads "during the calendar quarter" exactly as the grammar requires. Q&A-22 asks whether an employer whose order "is subsequently lifted in the middle of a calendar quarter" is eligible for the entire quarter, and answers:
Yes. An employer with business operations that are fully or partially suspended due to a governmental order during a portion of a calendar quarter is an eligible employer for the entire calendar quarter. However, only wages paid with respect to the period during which the employer is fully or partially suspended due to a governmental order may be considered qualified wages.
Eligibility attaches to the quarter, not to the days the order ran, and the wages sentence measures the qualified wages by "the period during which the employer is fully or partially suspended," which is the period of the suspension, not the nominal life of the order.9 The Service's own drafting history bears out the distinction. The question first appeared as FAQ 38 on the Service's website on April 29, 2020, where the answer limited the credit to "wages paid during the period the order is in force"; when the Service published the Notice in the Internal Revenue Bulletin on March 15, 2021, it replaced that phrase with "the period during which the employer is fully or partially suspended due to a governmental order." The Service changed its own measure from the order's life to the suspension's life.10
Q&A-16(4) recognizes that a suspension persists after an order operates:
If an employer can conduct comparable operations via telework, but the employer's operations did not previously allow for telework, or allowed for only minimal telework, then some adjustment period is expected, and, generally, the employer's operations are not considered partially suspended during that period. However, if an employer incurs a significant delay (for example, beyond 2 weeks) in moving operations to comparable telework (for example, implementing telework policies or providing employees with equipment to telework), then the employer's trade or business operations may be deemed subject to a partial suspension during that transition period.
The two-week illustration is offered "for example." The principle is that the suspension an order caused continues for the period the compelled transition takes.11 Q&A-17's Example 2 holds that an employer that "resumed all categories of its business operations" remains partially suspended while a spacing order is in force, so that the restoration of every category is not the end of the suspension.12
The Service is bound by each of those passages. Its own Chief Counsel directive states that "the Service is bound by the substantive or procedural guidance provided in a notice or announcement to the same extent as a revenue ruling or revenue procedure," and that Chief Counsel attorneys "may not rely on case law to take a position that is less favorable to a taxpayer in a particular case than the position set forth in a publication."13 And the United States obtained summary judgment in Stenson Tamaddon, LLC v. IRS on the representation that the Notice is the Service's considered reading of the statute and nothing more:
But Notice 2021-20 is merely guidance issued so that the public can have the benefit of knowing how the IRS is interpreting the relevant ERC statutory provisions. ... The Notice itself does not require [the plaintiff] or its clients to do anything or prevent them from doing anything.
Doc. 44 at 19
Even more, one would hope that the IRS is indeed evaluating ERC claims consistent with the explanations it has offered the public.
Doc. 44 at 24 n.4
The District Court, granting that motion, recorded its concern "by the prospect of something labeled as a 'policy statement' being practically applied as though it were a binding rule."14 A reading under which the favorable passages of the Notice bind the Service and the unfavorable glosses bind the taxpayer is not one the United States has offered to any court. The Notice's own words bear out the continuing suspension.
The fourth pathway: the restoration arithmetic, from the orders' own terms
The period the orders' own reopening steps took to restore each class of operation is a matter of dates the instruments fixed, and it is stated here from those dates alone. In every class the orders themselves fixed a restoration path measured in months, the last step of that path fell inside the second quarter of 2021 or later, and the operation was not restored on the day the last step took effect. The delay in restoring it is a suspension due to the orders that compelled the dismantling.
The restaurant dining room
Ordered closed in every State and the District between March 15 and March 24, 2020. Reopened at 25 percent in the first States in late April and May (Georgia April 27; Texas May 1 at 25 percent, May 22 at 50 percent, June 12 at 75 percent; Florida May 4 at 25 percent, May 18 at 50 percent; Colorado May 27; Virginia June 5 at 50 percent). Reopened in the Northeast only in June (New Jersey outdoor only June 15 and indoor not until September 4, 2020 at 25 percent; New York City outdoor June 22 and indoor September 30 at 25 percent; Massachusetts June 8 outdoor and June 22 indoor; Connecticut June 17 at 50 percent; Pennsylvania's green phase at 50 percent). Re-closed indoors in November and December 2020 in Washington, Oregon, Illinois, Michigan, Minnesota, New Mexico, Kentucky, Colorado, Pennsylvania (December 12 to January 4), New York City (December 14 to February 12) and California's regions (December 3 to January 25). Reopened at 25 percent in New York City on February 12, 2021, at 35 percent in New Jersey on February 5 and 50 percent on March 19, at 25 percent in Michigan on February 1 and 50 percent on March 5, at 25 percent in Illinois' Tier 3 step-down, and at 25 percent in Massachusetts to February 8. Freed of its last statewide cap on the dates in the table below, with Hawaii's caps still in force on September 30, 2021 and re-tightened August 10.15
| State | Last statewide dining-room cap lifted | Instrument |
|---|
| New York | May 19, 2021 (curfews to May 31) | Ex. NY-045 |
| New Jersey | May 19, 2021 (percentage cap); spacing to May 28 | Ex. NJ-050 |
| Connecticut | May 20, 2021 | Executive Order No. 12B (May 20, 2021) |
| Minnesota | May 28, 2021 | Ex. MN-038 |
| Massachusetts | May 29, 2021 | Ex. MA-048 |
| Pennsylvania | May 31, 2021 | Ex. PA-036 |
| Ohio | June 2, 2021 | Ex. OH-048 |
| Illinois | June 11, 2021 | Executive Order 2021-12 (June 11, 2021; Phase 5) |
| Kentucky | June 11, 2021 | Executive Order 2021-386 (June 11, 2021) |
| California | June 15, 2021 | Ex. SEC-02-073 |
| Michigan | June 22, 2021 | MDHHS Rescission of June 17, 2021 (effective June 22, 2021) |
| Washington | June 30, 2021 | Ex. WA-065 |
| Oregon | June 30, 2021 | Ex. OR-043 |
| New Mexico | July 1, 2021 | Public Health Emergency Order of June 30, 2021 (effective July 1, 2021) |
| Hawaii | In force on September 30, 2021; re-tightened August 10, 2021 | Ex. HI-025 |
A dining room that operated at 25, 50 or 75 percent of its seats for fourteen of the fifteen months before July 1, 2021, and at zero for four to six of them, did not have its full staff, its full supply contracts, its full booking calendar or its banquet business on July 1, 2021, and the dates that prove it are the orders' own.
The hotel and the venue
Lodging was closed or confined to essential guests in eleven States in the spring of 2020. Meetings and banquets were barred or capped in every State through the winter of 2020-21: Illinois' Tier 3 prohibited hotel meetings from November 20, 2020; Washington prohibited venue meetings from November 18; Massachusetts held lodging to 25 percent from December 26; Maryland's order read "Convention events are prohibited." Gathering caps ran to May and June 2021 in the Northeast and on the West Coast, the traveler quarantines to March and April 2021 (New York, Connecticut, Massachusetts) and to March 26, 2022 (Hawaii), the Conditional Sailing Order through the third quarter of 2021, and the entry proclamations and land-border prohibitions to November 8, 2021. A convention calendar that is booked twelve to twenty-four months ahead and was barred from March 2020 to May or June 2021 was not filled on July 1, 2021, because of the orders that emptied it.16
The fitness, arts and entertainment facility
Closed by name in every State's first closure order; reopened last and at the lowest fractions (gyms at 25 to 50 percent; theaters and cinemas dark in New York State to April 2, 2021 and in New York City to March 5, 2021; Michigan's gyms closed to September 9, 2020 and again from November 18 to December 20; California's indoor gyms and theaters closed in every Purple-tier county to March and April 2021); freed of the last statewide caps between April 6 and July 6, 2021, with Washington, Oregon, New Mexico, Rhode Island and Hawaii still capping on June 30. A season, a tour, a league and a class schedule that the orders cancelled for fifteen months were not restored on July 1, 2021.17
The house of worship
Capped at ten persons in most States in March and April 2020; capped at 25 to 50 percent through the winter and spring of 2021 in fourteen jurisdictions (California, Connecticut, Delaware, the District, Kentucky, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, Oregon, Rhode Island and Washington) until dates between April 12 and June 30, 2021; and its religious education, youth programs, galas and facility rentals governed by the school, child-care and gathering orders of the 2021-22 year.18
The retail sales floor
Closed in forty-three jurisdictions in March and April 2020; confined to curbside in a second wave of orders in April and May; reopened at 20 to 50 percent; held in Michigan to four customers per thousand square feet with departments closed and advertising barred; capped again in the winter (Illinois 25 percent; Washington 25 percent; Anchorage 25 percent; Colorado's Red level; Los Angeles County 20 percent); and freed of the last statewide caps on dates from March 10, 2021 (Texas) to June 30 (Washington, Oregon) and July 1 (New Mexico), with three States still capping retail occupancy on June 30, 2021 and Hawaii never before September 30.19
The dental chair and the elective procedure
Closed to all but emergency care in every State from March 2020 until each State's reopening instrument took effect between April 22 and June 8, 2020; then held to fallow-time, screening, PPE and appointment conditions under board rules and health-department orders that ended between April 5 and July 1, 2021 (Texas's 22 TAC 108.7 to June 18; Iowa's dental mandate to June 26; Minnesota to May 27; Oregon and Washington to June 30); re-postponed in the winter in Texas, Pennsylvania (the 50 percent reduction order to August 23, 2021), California, Nebraska, Iowa, Indiana, Mississippi, New Mexico, Massachusetts, Utah, Washington and Maryland; and passed on June 21, 2021 into the OSHA Healthcare Emergency Temporary Standard without a day's interval. A recall schedule that runs six months ahead and was cleared by order twice was not full on July 1, 2021.20
The office
Closed or reduced to a fraction by telework mandate in every State that issued one, with the mandates renewed in terms in the winter of 2020-21 and ending on April 4 (Pennsylvania), April 14 (Minnesota), May 6 (Oregon's last "Extreme Risk" application), May 20 (Connecticut's 50 percent rule), May 24 (Michigan's MIOSHA remote-work rule), June 4 (New Jersey) and June 10, 2021 (the 25 percent ceiling in every federal workplace), and succeeded by the State workplace standards and the Safer Federal Workforce Task Force rules. A workforce dispersed by mandate for fifteen months, with leases surrendered, equipment removed and meetings moved to video, was not reassembled on July 1, 2021.21
The school and the child-care center
Closed to students by order in the spring of 2020; remote or hybrid by order through the 2020-21 year in most States; returned on State-set dates in the first quarter of 2021; and placed under masking, exposure-control and quarantine orders again in eighteen States and the District for the 2021-22 year.22
The plant, the warehouse and the job site
Closed by order in the manufacturing and construction States in March and April 2020; restarted only on written conditions from late April to June 2020; held to the State workplace standards through the third quarter of 2021 and to the Defense Production Act allocation orders and the border instruments to November 2021. The Federal Reserve's own account of the mechanism is the restoration arithmetic in the central bank's words: "Companies laid off workers, idled plants, and canceled orders for materials ... by late 2020, factories in some industries were scrambling to find the workers, parts, and materials ... The massive influx of goods combined with COVID-19-related staffing issues have overwhelmed U.S. ports."23
The fifth pathway: the orders in force in each later quarter
The continuing suspension does not stand alone in any quarter, because orders were in force in every one. In the third quarter of 2021 they were the federal general layer (the conveyance mask order and the TSA, FRA and Coast Guard directives; the entry proclamations and the monthly land-border prohibitions; the Title 42 suspension and the inbound-testing order; the Conditional Sailing Order; the Healthcare Emergency Temporary Standard and the revised National Emphasis Program; the CMS conditions; Executive Order 13991, Executive Order 14042 and the Safer Federal Workforce Task Force rules; the Defense Production Act orders and the scarce-materials designation; the federal eviction moratoria to September 30; the federal court orders), the State emergencies and the instruments they kept alive, the Delta-wave masking and exposure-control, vaccination-proof and capacity orders of July to September 2021 in eight States, the District and more than thirty metropolitan jurisdictions, the school and child-care masking and quarantine orders of the 2021-22 year in eighteen States and the District, the quarantine and isolation orders on exposed persons, the health-care-worker and public-employee mandates with deadlines inside the quarter, the sector regulators' conditions, and the counterparty orders in force in the quarter.24
The Government's own records describe the quarter. On September 30, 2021, 5.0 million persons were unable to work because their employer had closed or lost business due to the pandemic, 13.2 percent of the employed were teleworking because of it, and employment stood 5.0 million below its pre-pandemic level; 17.5 percent of establishments required vaccination of some or all employees; 38.8 percent of small businesses reported domestic supplier delays; and the Federal Reserve attributed the quarter's deceleration to "a pullback in dining out, travel, and tourism in most Districts, reflecting safety concerns due to the rise of the Delta variant, and, in a few cases, international travel restrictions," with other sectors "constrained by supply disruptions and labor shortages." Those are facts and circumstances; they are never presented here as orders.25
Congress re-enacted the Suspension Clause for the third quarter of 2021 on March 11, 2021, against the record of the orders then in force, and left it in place when it terminated the fourth quarter on November 15, 2021.26