The Service's positions, answered
The Service's letters and its examiners' positions against employers of this class reduce to fourteen propositions. Each is answered below from the statute's text, from Tri-State, from the instruments in the Library and from the United States' own representations. None is presented as a reasonable alternative to the text, because the United States has represented that the document carrying each gloss "lacks the force of law" and that "the statute will control."259
No orders in effect during the quarter
There were no government orders related to COVID-19 in effect during the quarter which could have fully or partially suspended your trade or business.
The sentence is a recital about the Service's records, and the public record contradicts it for every quarter. For the third quarter of 2021 alone, the quarters section lists an unrevoked Defense Production Act order on every meat and poultry plant, a national emphasis program naming the slaughter and processing industries by NAICS code, occupational-safety standards regulating the labor camp, the crew bus and the exposed worker in California, Oregon, Washington, Virginia and New York, an airborne-transmission control on every conveyance, entry suspensions covering thirty-three countries, land-border limits renewed three times inside the quarter, a Title 42 order reassessed inside the quarter, universal indoor face-covering orders (airborne-transmission controls binding every indoor workplace and public setting) in seven States and the District, California's settings-based face-covering and health-care vaccination orders, face-covering orders in more than forty counties and cities, vaccination orders on the federal workforce, federal contractors and the workforce's institutions, and tribal and territorial orders, each in force on some or all of the days between July 1 and September 30, 2021, each published by its issuer.260 For the second quarter of 2020 the record includes the stay-at-home orders of forty-two States and the District, the closure of every school in the country and of every restaurant dining room in forty-nine States and the District, the closure of the consulates and USCIS, the closure of the plants, and the President's own finding that "recent actions in some States have led to the complete closure of some large processing facilities."261 The National Taxpayer Advocate has recorded that the Service's 2024 letters were issued "based on the results of risk filter analyses rather than a prior examination."262 A letter that asserts the absence of orders no one examined is not a determination of facts and circumstances; it is an error of fact, and it describes a period that did not occur.
The employer was designated essential and remained open
The employer operated an essential business and remained open.
The statute does not contain the word "essential," and the designation was never an exemption from the orders; it was the premise of the conditions the orders imposed. Every stay-at-home order permitted food and agriculture to continue on condition of compliance with distancing, hygiene, screening and face-covering rules, the workplace infection-prevention and exposure-control requirements of the essential designation; Georgia's imposed sixteen measures on every Critical Infrastructure employer; Washington's Governor prohibited any agricultural employer from operating after June 3, 2020 except in compliance with the State's requirements; Kentucky required "six-foot distancing for their entire shift"; North Carolina required surgical masks of every plant worker; Michigan required a test of every worker before in-person work; Executive Order 13917 made the CDC-OSHA guidance the enforceable condition of every plant's continued operation.263 The Notice itself says so: Q&A-11 excludes only an employer whose order "allows all of the employer's operations to remain open," provides that "an essential business that is permitted to continue its operations may, nonetheless, be considered to have a partial suspension of its operations" where an order "requires the business to close for a period of time during normal working hours," and Q&A-17's Example 4 finds an essential hospital partially suspended; Q&A-19's Example is a food processing facility.264 Tri-State held a hospital that remained open throughout partially suspended by the protocols its State's proclamation imposed.265 An employer permitted to remain open on conditions that delayed and interrupted a portion of its operation was partially suspended by the order that imposed the conditions, and the Service's own Notice says so.
Stay-at-home orders directed to the public are not considered
Stay-at-home orders directed to the public are not considered; only orders directed at business operations count.
The statute says nothing of the source of the limitation or the addressee of the order. It asks whether the order limited "commerce, travel, or group meetings," and a stay-at-home order limits all three in terms. The Service's own Q&A-10 lists among its four qualifying orders "[a] State's emergency proclamation that residents must shelter in place for a specified period," beside the mayor's closure order, a curfew on residents and a health-department cleaning closure.266 The United States has told the Ninth Circuit that "a business may be suspended 'due to' a government order addressing a third party."267 The FAQ of April 29, 2020, the Service's published position while the second quarter of 2020 was open, defined governmental orders as those that limit commerce, travel or group meetings "in a manner that affects an employer's operation of its trade or business," and listed the shelter-in-place proclamation.268 For this industry the stay-at-home orders confined the households that buy food at retail, the workers who harvest and pack it, and the customers of the restaurants that buy it at wholesale; each is a limitation on this industry's commerce. A sentence excluding orders addressed to the public appears in no enactment and is contradicted by the Notice the Service administers; it is not a rule of law, and the United States has disclaimed the authority to make it one.
The employer could have continued comparable operations through telework
The employer could have continued comparable operations through telework.
"Comparable operations" and "telework" are not in the statute. A slaughter line, an orchard, a dairy, a packing house and a labor camp cannot be operated from home; the Notice's own factor (3) provides that where "the employer's physical work space is so critical to its trade or business operations that tasks central to the trade or business's operations are unable to be performed remotely, then this factor alone indicates that the employer is not able to continue comparable operations," and gives "manufacturing involving special equipment or materials that cannot be accessed or operated remotely" as its example.269 Q&A-15's second paragraph finds a partial suspension wherever "the closure of the workplace causes the employer to suspend business operations for certain purposes, but not others," and its Examples 2 and 3 find partial suspension wherever equipment or a laboratory was reached.270 That an employer's sales office teleworked under New Jersey's, Pennsylvania's or Los Angeles County's telework mandate does not make the plant or the harvest comparable; it makes the office a portion of the operation the order changed. The FAQ page's sentence that "[i]f all your employees were able to telework ... your business wasn't suspended" is narrower than the Notice itself and has no source in any enactment; as a statement of a statute that reads "fully or partially suspended," it is factually incorrect, and applied to a slaughter line or an orchard it describes an operation that does not exist.271
The orders affected the employer's customers, not the employer
The orders affected the employer's customers, not the employer (Q&A-13).
An order that closed every restaurant, school and institutional kitchen in the country limited the commerce between those customers and the growers, packers and processors that supplied them, and the statute asks nothing about which party to the transaction the order addressed. Q&A-13 has no source in the text; it cannot be reconciled with Q&A-10's listing of the shelter-in-place proclamation, with Q&A-12's supplier rule, or with the United States' representation that an order "addressing a third party" can suspend a business; and its own example acknowledges that the order "limits travel and requires members of the community to stay at home."272 The exclusion was, in April 2020, confined to "an essential business that is not required to close its physical locations" claiming a suspension "for the sole reason" of the customers' order; the Notice extended it to every employer and to any "reduction in demand" on March 1, 2021, eleven months after the second quarter of 2020 closed.273 For this industry the Department of Agriculture itself attributed the collapse of demand to closures "some of which are government-mandated," naming "the closures of restaurants, bars, and gyms."274 The orders on the industry's customers were orders limiting commerce; the commerce they limited was this industry's; and the statute reaches them in terms.
The employer's measures were voluntary
The employer's measures were voluntary (Q&A-14).
"Voluntary" is not in the statute; "due to" is, and it means but-for causation. Q&A-14 by its own terms reaches only a suspension "not due to a governmental order."275 A plant that slowed its line to six-foot spacing under Executive Order 13917's enforced guidance and Kentucky's whole-shift rule, a grower that removed the top bunks under Washington's rule, a farm labor contractor that halved its bus loads under Cal/OSHA's § 3205.4, a processor that tested every worker under Michigan's order, and a packer that converted its food-service lines to retail because every restaurant in the country was closed by order did what the law required or what the orders on its counterparties left it to do. Tri-State held that "the required protocols and procedures to comply with the Proclamation" were caused by the order, that the hospital's changes "were not voluntary," and that on the United States' contrary theory "there are not many businesses or any business that would be eligible under the ERC at all."276 Where an order compelled the change, or orders on counterparties limited the commerce the operation depended on, the change was due to the orders. A change the law required is not a choice, and a position that calls it one reads "due to" out of the statute.
The premise of Q&A-14 is the absence of a command, and the layers section shows that no employer in this industry met that description in any quarter. Q&A-14 reaches only a suspension "not due to a governmental order," and the United States and the District Court have defined the excluded employer as one "not being ordered to do so."277 The reopening orders let a farm or a plant operate only on conditions with the force of law: Washington's agricultural requirements and its "No employer may operate ... unless" clause, Texas's occupancy limits on the industry's public-facing operations and its GA-29 face-covering command, an airborne-transmission control laid on every commercial entity, under the Disaster Act's penalty, Arizona's "shall develop, establish and implement policies" clause, New York's Department of Health conditions on agriculture and manufacturing, and Executive Order 13917 for every meat and poultry plant.278 The standing statutes commanded the same conduct independently: Texas's "Each person shall act responsibly to prevent and control communicable disease" and its safe-workplace statute; Ohio's R.C. 3701.81(C) and 4101.11; Indiana's disease-control and workplace duties; and, in every State, the general duty clause, 29 U.S.C. § 654(a)(1), enforced by citation against this industry from September 2020.279 The legislatures of Texas, Arizona and Florida then fixed the standard of care as compliance with governmental standards, guidance and protocols, retroactively to the first days of the emergency.280 The safe-workplace statutes had no COVID-19 content until the health authorities said what a safe plant, field and labor camp required; the spaced line, the screened door and the tested crew were taken because those directives defined the duty and would not have been taken without them. "Due to" is but-for causation, and the causation here runs from the command to the measure without an intervening choice.281 The Notice's own words confirm it: a modification "required by a governmental order as a condition of reopening" is a partial suspension due to the order.282 A statute or rule that commands conduct is an order from an appropriate governmental authority, whatever its date and whichever branch enacted it, and the Service's premise fails wherever a command reached the employer. In this industry one reached every employer in every quarter.
The portion affected was not more than nominal
The portion of the business affected was not more than nominal (the 10 percent figure applied as a floor).
The ten percent figure is, in the United States' own words, "not determinative," "[e]ffectively ... a safe harbor," "not an eligibility requirement," a provision that "does not impose a threshold or place a limitation on receiving the credit," "a quintessential safe harbor," and "a safe harbor rather than a hard floor"; the District Court held it "subject to rebuttal" and "not an exclusionary cut-off point"; Tri-State held it "a method for the test to be met not as a requirement to meet the test."283 Congress placed its numerical thresholds in the gross-receipts prong alone.284 The figure itself first appeared in the Notice on March 1, 2021, eleven months after the second quarter of 2020 closed; the FAQs of April 29, 2020 carried no percentage and no word "nominal," and the June 19, 2020 revision added the word without the number.285 The Service's Chief Counsel memorandum, FAQ page and Forms 886-A nonetheless apply the figure as a definition of eligibility, and, as the appellant's opening brief in Stenson Tamaddon records from the administrative record, "the IRS has identified no instance where a claim was approved below the 10 percent cutoff."286 The United States cannot describe the figure as an optional safe harbor when the Notice is challenged and administer it as a floor when a claim is examined; it chose the first description in two federal courts, and The COVID Project holds the United States to it. This analysis treats the figure as the United States' safe harbor and nothing more. The showing for this industry exceeds it many times over as a matter of the orders' own terms: the food-service channel that closed in March 2020 took about half of the industry's output; a labor camp that lost its top bunks lost a large fraction of its capacity; a plant closed for fourteen days lost every hour of that fortnight; a plant re-engineered for six-foot spacing lost the throughput the spacing took; and "portion" is not "significant."287
The required modifications had only a nominal effect
The required modifications (masks, gloves, spacing, screening) had only a nominal effect (Q&A-18).
The statute has no nominal-effect requirement; a partial suspension is "a temporary delay, interruption, or termination of a portion an employer's business," and Tri-State refused the United States' attempt "to conflate 'more than nominal' to suggest that it means 'significant.'"288 Q&A-18's categorical sentence that mask and glove requirements "will not result in more than a nominal effect" is a factual conclusion stated as a rule, with no record, and it contradicts Q&A-18's own first paragraph, which lists face-covering requirements among the modifications "required by a governmental order as a condition of reopening a physical space for business or service to the public," and Q&A-17, which treats "such a modification of operations" as "a partial suspension of business operations due to a governmental order."289 The United States has told the District Court the opposite of the Service's sentence:
employees having to wear face masks may impact business operations
Doc. 44 at 30
and that operational orders "would also be considered."290 The modifications this industry was ordered to make changed the operation of every function they reached, and the orders' own operative clauses state how. Six feet between workers on a slaughter line is a line that runs slower or with fewer workers; a housing rule that removes the top bunks is half a camp; a transport rule that cohorts and spaces a crew bus is half a bus; a testing rule that quarantines every new arrival for fourteen days is a crew that starts two weeks late; an exclusion rule that removes every close contact for ten to fourteen days in the Delta wave is a shift that does not run full; a surgical-mask rule, one of the exposure controls a plant operated under, in a plant at 40 degrees and 100 percent humidity is a rule that slows every worker who wears one. Each is a delay or interruption of a portion of the operation; the Federal Reserve recorded the aggregate as "reduced production capacity at meat-processing plants due to closures and social distancing measures."291 Where the Service asks whether a modification had more than a nominal effect, the answer for this industry is written in the orders' own operative clauses.
A declaration of emergency is not an order
A declaration of emergency is not an order (Q&A-10).
A bare declaration of emergency that limits nothing is the predicate of the orders issued under it, not an order, and this analysis relies on none as such. It relies on the orders issued under the declarations: the stay-at-home proclamations, the closure orders, the housing rules, the testing orders, the face-covering orders, the entry proclamations, the border notifications, the conveyance order, the workplace standards and the county orders, each of which limited commerce, travel or group meetings in terms. Q&A-10 itself provides that a declaration "that limits commerce, travel, or group meetings" is a governmental order where it relates to the suspension of the employer's operation, and the declarations of Georgia (sixteen measures on every Critical Infrastructure employer), Texas (GA-08's closures), Hawaii (the supplementary proclamations' quarantine and closures) and every metro in the metro table carried operative limitations in the same instrument.292 Where a declaration is cited in this analysis, it is cited for the operative clause it carries or for the continuation of the orders that depend on it. A position that answers a proclamation carrying sixteen operative measures on every Critical Infrastructure employer, or a proclamation that quarantines every arriving traveler, by calling it a declaration describes instruments other than the ones this analysis cites.
The supplier was not itself closed by order
The supplier was not itself closed by order; supply-chain effects are too attenuated (AM 2023-005).
Q&A-12 says an employer "may be considered to have a full or partial suspension of operations due to a governmental order if, under the facts and circumstances, the business's suppliers are unable to make deliveries of critical goods or materials due to a governmental order that causes the supplier to suspend its operations." The United States told the Ninth Circuit that the rule requires no closure order against the supplier:
never even mentions a 'physical[ ] clos[ure]' order against the supplier
Br. for Appellees at 41 n.5
AM 2023-005 "may not be used or cited as precedent," and its additions (a "narrow, limited exception," an alternate-supplier element, a requirement that the employer produce the supplier's order, a requirement that an order apply to the employer's own operations) appear nowhere in Q&A-12 or in the statute.293294 For this industry the supplier orders are not hypothetical: the parts, packaging, chemical and equipment plants of Michigan, Pennsylvania, New York, New Jersey, Ohio, Indiana and Wisconsin were closed or confined by orders in the Library from March 19-24, 2020 until May and June 2020; Ontario and Mexico closed theirs by orders of March 24 and March 30-31, 2020; the protective equipment every plant was ordered to buy was under federal criminal and allocation controls; and the United States itself found the resulting shortages "ongoing" in September 2021.295 "Attenuated" is not a word in the statute; "due to" is, and it means but-for. The supplier's order is cited by exhibit ID, and Q&A-70 asks for "any governmental order to suspend the employer's business operations" and the records "the employer relied upon," not for a document from the supplier.296
The orders had lifted before the quarter began
The orders had lifted before the quarter began; any effect was a lingering effect.
Two answers, each sufficient. First, the orders had not lifted: the quarters section lists, for each quarter, the instruments in force on its first and last day, and for the third quarter of 2021 most of them were issued or renewed inside the quarter. Second, where an order had expired, the suspension it caused continued because of it for the period its compelled dismantling took to reverse: "during the calendar quarter" modifies "suspended"; a suspension includes a "delay"; "due to" is but-for; Q&A-22 makes an employer suspended for part of a quarter eligible for the whole of it; and Q&A-16(4) treats the transition an order compels as itself a partial suspension "during that transition period."297 The orders' own phase steps fix the arithmetic: the food-service channel reached full capacity in the largest markets only between June 11 and July 1, 2021; the labor camps were never restored during the period; the recruitment cycle was run against consulates operating post by post; the line was still under Executive Order 13917 and a national emphasis program that named its industry.298 AM 2023-005's sentence on "residual delays" asks whether a lifted order "constitute[s] a governmental order in subsequent calendar quarters," which is not the statute's question, and AM 2023-005 "may not be used or cited as precedent."299 This analysis never says an expired order suspended anyone by its own force; it says the suspension the order caused continued because of it, and it lists the orders in force. A letter that describes the third quarter of 2021 as a quarter in which the orders had lifted describes, for this industry, a quarter that did not occur: the labor-housing rules, the Defense Production Act order, the national emphasis program, the conveyance order, the entry suspensions and the border notifications were in force on every day of it.
The employer did not experience the required decline in gross receipts
The employer did not experience the required decline in gross receipts.
The gross-receipts prong is a separate route to eligibility that this analysis does not rely on. The two prongs are alternatives joined by "or"; Tri-State held that the gross-receipts prong shows "an employer may be economically affected without any partial or full suspension of trade or business operations due to a government order," which is "logical within the scope of the act" and does not narrow the suspension prong, and found "even Defendant's own argument is contradictory" on the point.300 An employer whose receipts held or rose because it sold into retail what it could no longer sell to closed restaurants, or whose receipts rose with the price of meat when the plants closed, was suspended in the statutory sense all the same: the statute asks about the operation, not the receipts, and Congress placed its receipts test in a different clause.301
The instruments relied on are guidance, not orders
The instruments relied on are guidance, recommendations or best practices, not orders.
This analysis relies on orders. Executive Order 13917 is a presidential order under a statute with penalties; OSHA's national emphasis program is a directive of the enforcing agency; the Cal/OSHA, Oregon OSHA, Washington, Virginia, MIOSHA and New Jersey instruments are regulations and executive orders with citation and penalty provisions; the Michigan testing order carried civil penalties and survived a motion for a temporary restraining order; North Carolina's Executive Order 147 made violation a Class 2 misdemeanor; Washington's Proclamation 20-57 made it a gross misdemeanor; the conveyance order carries criminal penalties; the proclamations, notifications and Title 42 orders are Federal Register instruments; the county orders carry fines, closure and misdemeanor sanctions; the HERO Act is a statute.302 The CDC-OSHA guidance of April 26, 2020 is guidance, and this analysis relies on it only as the standard Executive Order 13917 made the enforceable condition of every plant's continued operation; the Chief Counsel's own memorandum on OSHA guidance states that an employer "may be eligible" where "an executive order from a Governor" made workplace protocols mandatory.303 Q&A-10 provides that whether an instrument is a governmental order "is determined without regard to the level of enforcement," and the Court of Federal Claims has held that health-department guidance issued under compulsory authority "qualifies as an 'order.'"304 Where a recommendation is cited in this analysis (the Northern Virginia health directors' recommendation of August 3, 2021; the Hamilton County recommendation of July 30, 2021), it is cited as such and as the recited basis of the orders that followed it. An instrument that carries a fine, a misdemeanor or a closure sanction is an order under any dictionary, and a position that calls it a recommendation describes instruments other than the ones this analysis cites.
"Order" must be given its ordinary meaning
'Order' must be given its ordinary meaning.
Agreed. An order is "[a]n authoritative indication to be obeyed; a command or direction."305 Applied to the instruments listed in the quarters section and in the tables on this page, every one is an authoritative indication to be obeyed, issued by an authority with power over the commerce, travel or meetings it limited, and backed by a sanction: the President's direction under the Defense Production Act; the Governor of Washington's prohibition on operating "unless the employer complies"; the North Carolina Governor's "must wear"; the Michigan Department's testing requirement with civil penalties; the Cal/OSHA Standards Board's "shall"; the CDC's "must wear a mask"; the Department of Homeland Security's limitation of the land borders; the county health officers' "shall" with fines and closure. The ordinary meaning of "order" is the meaning this analysis applies, and it reaches every instrument on which the findings rest.
The Service is free to disagree about the weight of these instruments. It is not free to say they did not exist.