In plain terms: some letters say that unless your own supplier was ordered shut, and unless you can produce your supplier's order, the effect of an order on your supply chain is "too attenuated" to count. The statute asks one thing: whether your operation was suspended "due to" orders limiting commerce. It does not ask whom the order was addressed to. Orders closed plants, placed materials under Defense Production Act allocation, barred exports, restricted the land borders and conditioned every port, rail yard and conveyance. Where your production, sales or service was delayed because of those orders, it was suspended because of them. "Attenuated" is a word from a Chief Counsel memorandum that says of itself that it "may not be used or cited as precedent," and the United States has told the Ninth Circuit that the supplier rule requires no closure order against the supplier at all.
"The supplier was not itself closed by order; supply-chain effects are too attenuated (AM 2023-005)."
Form language of the Service's letters and Forms 886-A on the suspension prong
The statute and the causation rule
The Suspension Clause, section 2301(c)(2)(A)(ii)(I) of the CARES Act and section 3134(c)(2)(A)(ii)(I) of the Internal Revenue Code, asks whether the operation was "fully or partially suspended during the calendar quarter due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings." It says nothing of the source, the addressee or the subject of the order. Where an order closed a supplier's plant (Michigan Executive Order 2020-21 of March 23, 2020, which prohibited "in-person work that is not necessary to sustain or protect life"; Pennsylvania's Order of March 19, 2020 closing all businesses that are not life sustaining, Ex. PA-002; Mexico's federal Acuerdo of March 31, 2020 suspending non-essential activities, Ex. FOR-007), placed its output under Defense Production Act priority and allocation (Executive Order 13909, Ex. SEC-10-001; the Defense Production Act order of March 27, 2020 to General Motors Company, Ex. SEC-10-010; the designation of scarce materials of March 25, 2020, Ex. FED-074), barred the export of its materials without federal approval (FEMA's temporary final rule of April 7, 2020, Ex. FED-075), limited the land-border crossings through which its inputs and workers moved (Ex. FED-216; Ex. FED-233) or conditioned every port, rail yard and conveyance through which its goods moved (the CDC conveyance order, Ex. FED-020, applied at every port as the Coast Guard's bulletin announced, Ex. AGY-USCG-PORTS-038 (context); the Federal Railroad Administration's Emergency Order No. 32, Ex. AGY-AVIATION-SURFACE-014), and the employer's production, sales or service function was delayed because of it, the function was suspended because of the order.1
"Due to" is but-for causation. "Attenuated" is a proximate-cause word. In Tri-State Memorial Hospital v. United States the United States agreed that "the plain meaning of 'due to' is 'because of,'" then urged a "proximate, independent and sufficient cause" formulation; the court held that "Defendant's interpretation improperly adds words into the statute" and that "'due to' requires 'but-for' causation."2
AM 2023-005
The ground's authority is Chief Counsel Memorandum AM 2023-005 of June 30, 2023. AM 2023-005 says of itself: "This GLAM may not be used or cited as precedent." It converts Q&A-12 of Notice 2021-20 (the "Notice") into "a narrow, limited exception." It states that a supply-chain disruption "by itself, does not rise to the level of a full or partial suspension primarily because no governmental order applies to the employer's operations," adding a requirement that an order apply to the employer. It adds an "alternate supplier" element. And it requires the employer to possess and produce the supplier's order. None of those words is in the statute. None is in Q&A-12, which says that 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," and whose example recites the absence of an alternate supplier as a fact, never as a condition.3
The United States has described the same rule to two courts without those additions. To the District Court it quoted Q&A-12 in the Notice's words and wrote that an employer "may still be eligible for the ERC if, under the facts and circumstances, its business operations are fully or partially suspended because of the supplier's inability to deliver." To the Ninth Circuit it said this:
"For example, the Notice explains that a business may be suspended 'due to' a government order addressing a third party (such as an order that suspends the operations of a supplier of the business). ... But the rule never even mentions a 'physical[ ] clos[ure]' order against the supplier."
Br. for Appellees at 41 & n.5
The phrase on the Service's FAQ page, that the exception "only applied when the employer absolutely could not operate without the supplier's product" (Ex. GOV-003), appears neither in Q&A-12 as the United States quoted it nor in the United States' briefs.4
A memorandum that "may not be used or cited as precedent," adding elements the statute does not contain to a rule the United States has described in court without them, is not a ground on which any claim can be decided.
Start with the statute's question: was part of your operation suspended because of an order limiting commerce? If an order closed your supplier's plant, put its materials under federal allocation, barred their export, restricted the border they crossed or conditioned the port, rail yard or truck they moved through, and your production, sales or service was delayed because of that, the answer is yes. The court in Tri-State held that "due to" means but-for causation and that adding a proximate-cause gloss "improperly adds words into the statute." The United States has told the Ninth Circuit that the supplier rule "never even mentions" a closure order against the supplier. AM 2023-005, which the letter cites, says of itself that it "may not be used or cited as precedent." The interconnected-economy analysis traces the orders on suppliers, carriers, ports and borders.