The Service's positions, answered
Each position the Service takes against employers of this class is answered below from the text of the Suspension Clause, from Tri-State, from the instruments in the Library and from the United States' own representations, which are collected with their pins at The IRS: in the Government's own words. None survives contact with the orders. Each section is headed with the position in the Service's general vocabulary and closes with the answer.
Ground 1. No orders in effect
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.
For the second quarter of 2020 the sentence is answered by the closure orders of Pennsylvania, New Jersey, Michigan, Washington, Vermont, New York, Boston, Philadelphia, New York City and the Bay Area and by the stay-at-home orders of every other State; for the third and fourth quarters of 2020 and the first and second quarters of 2021 by the mandatory site regimes and workplace standards stated quarter by quarter above; and for the third quarter of 2021 by the instruments listed in the third-quarter inventory, each with its issuer, effective date and status on July 1 and September 30, 2021: the Cal/OSHA, Virginia, Oregon and Washington standards, New Jersey's Executive Order No. 192, New York's HERO Act plans and activation, OSHA's National Emphasis Program, Executive Order 14042, the CDC conveyance order, the Healthcare ETS, the Delta-wave face-covering orders of the States and metros and the court orders of at least twenty-nine States.235 The Service's letter recites the state of its records; the Library records the state of the law. A sentence that describes a construction industry under no governmental order between March 2020 and September 2021 describes a period that did not occur.
Ground 2. The "essential" designation
The employer operated an essential business and remained open.
The word "essential" is not in the statute. In Pennsylvania construction was not essential at all from March 19 to May 1, 2020; in New Jersey non-essential construction ceased from April 10 to May 18, 2020; in Michigan construction was not critical infrastructure from March 24 to May 7, 2020; in Washington it was "not considered to be an essential activity" from March 25 to April 24, 2020; in New York, Vermont and the Bay Area only enumerated projects were essential.236 Where construction was designated essential, the designation permitted work only on the order's terms, and the terms were the suspension: four persons on a Pennsylvania site, crews of two in Vermont, six feet in Washington, a supervisor "at all times" in the Bay Area, daily screening in Michigan, a written plan in New York, dictated policies in New Jersey, and a workplace standard in California, Virginia, Oregon and Washington.237 The Notice's own Q&A-15 and Q&A-17 provide that an employer whose operations continue is partially suspended where some operations are closed "for certain purposes, but not others" or where a required modification affects them, and the United States told the District Court that an employer is partially suspended "if it was required to suspend certain operations for certain purposes."238 An "essential" designation that came with a headcount cap is a partial suspension with a label attached.
Ground 3. Orders directed to the public
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, the addressee or the subject of the order; it asks whether the order limited commerce, travel or group meetings. A stay-at-home order limits all three in terms, and the Notice's own Q&A-10 lists a State's shelter-in-place proclamation among the qualifying orders.239 The United States has represented that the Notice "lacks the force of law," so the only document carrying the "directed at" gloss binds no one, and the United States itself told the Ninth Circuit that an order addressing a third party suffices.240 For this industry the stay-at-home orders were also orders directed at business operations: every one of them told construction what it could and could not do, from Pennsylvania's "No" to Minnesota's "Construction and critical trades" to Wisconsin's "optional or aesthetic construction should be avoided."241 The position asks the statute to distinguish between an order that closes a contractor's site and an order that confines the contractor's crews, customers and inspectors to their homes; the statute makes no such distinction, and neither did the orders.
Ground 4. Telework
The employer could have continued comparable operations through telework.
A job site is not performed by telework; the operation the Suspension Clause asks about is the pouring of concrete, the framing of walls, the pulling of wire and the setting of pipe, and no order permitted those to be done from home. The Notice's telework rule (Q&A-15) addresses an employer "able to continue operations comparable to its operations prior to the closure" and, by its own second paragraph and Q&A-16's fourth factor, recognizes partial suspension where some operations cannot be performed remotely and where the transition itself delays the work.242 The offices of this industry did telework, because orders in New York, New Jersey, Oregon, Minnesota, Colorado, Vermont, Pennsylvania, Iowa, Michigan and Washington required them to; that compelled conversion of the estimating and project-management function is itself a modification the orders imposed, and Tri-State holds that the "required protocols and procedures to comply" with an order are the suspension the order caused.243 Telework is the compelled modification of the office, not the absence of a suspension of the site.
Ground 5. Customers, not the employer
The orders affected the employer's customers, not the employer (Q&A-13).
The orders that reached this industry reached the employer by name: the Pennsylvania list marked its NAICS codes, New Jersey's Executive Order No. 122 ceased its "physical operations," Michigan's order prohibited its in-person work, Washington's memorandum said it was "not authorized," Virginia's standard classified its settings, Cal/OSHA's standard governed its sites and vehicles, the HERO template named its toolbox talks and day laborers, Executive Order 14042 named its subcontractors at any tier, and Columbus's ordinance named NAICS 236-238.244 Where the order reached the customer, the statute still asks whether the order limited commerce, and an order that closed a restaurant, a hotel, an office building or a school closed the site on which the contractor was working; Q&A-12 applies the clause exactly so to a supplier, and the United States has said the supplier rule requires no order against the employer.245 Q&A-13, as rewritten on March 1, 2021, extended the customer exclusion from essential businesses not required to close to every employer and to any "reduction in demand"; it is a gloss without force of law, and it does not reach an employer whose own sites were closed, capped and conditioned.246 A position that treats the closure of the building a contractor is building as an event that happened to someone else has mistaken the statute's object.
Ground 6. Voluntary measures
The employer's measures were voluntary (Q&A-14).
Nothing in the instruments inventoried above was voluntary. A crew capped at four persons in Pennsylvania, a site shut in New Jersey, a supervisor posted "at all times" on a Bay Area site, a daily entry screen in Michigan, a written program and paid exclusion under 8 CCR § 3205, a plan adopted under Labor Law § 218-b, a face covering worn under Ordinance 2388-2021 and a vaccination clause inserted under Executive Order 14042 were each imposed by an instrument carrying penalties: N.J.S.A. App. A:9-49 and -50, Va. Code § 40.1-49.4, Labor Code § 6317, RCW 49.17.180, civil citations and license suspension.247 Tri-State held on the same argument that the hospital's changes "were not voluntary" because "[t]he Proclamation required" them.248 Q&A-14 addresses an employer that suspends operations "voluntarily" without an order; it has no application where the order is in the Library with a penalty clause. A measure taken because the law commanded it is the opposite of voluntary.
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."249 No contractor in the eight principal States answered that description in any quarter. The reopening orders permitted work only on conditions with the force of law: Pennsylvania's "must adhere," New Jersey's "is required to abide," Michigan's "must, at a minimum," Washington's "[n]o employer may operate ... unless," New York's "must be operated subject to," California's "shall establish, implement, and maintain," Texas's "shall operate at no more than" and Arizona's "shall develop, establish and implement," each carrying a penalty clause (the standing duties).250 The standing statutes commanded the same conduct: Texas Health and Safety Code section 81.002 ("Each person shall act responsibly to prevent and control communicable disease"), the workplace-safety statutes of all eight States, and the general duty clause, 29 U.S.C. § 654(a)(1).251 Texas, Arizona and Michigan then fixed the standard of care as compliance with governmental standards and orders, retroactive to March 2020, and California, Washington and Pennsylvania left the contractor to a negligence law that takes the breach of a statute or rule as proof or evidence of fault.252 The safe-workplace statute had no COVID-19 content until the health authorities said what a safe site required; the crew caps, gate screens, spacing rules and emptied estimating offices 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.253 The Notice's own words confirm it: a modification "required by a governmental order as a condition of reopening a physical space for business or service to the public" is a partial suspension due to the order.254 A statute that commands conduct is an order from an appropriate governmental authority; the Service's premise that no command reached the employer fails wherever one did, and in this industry one reached every employer in every State on every day of the six quarters.
Ground 7. Not more than nominal; the ten percent figure
The portion of the business affected was not more than nominal (the 10 percent figure applied as a floor).
The ten percent figure is, by the United States' own account, "not an eligibility requirement," "[e]ffectively ... a safe harbor," "not an exclusionary cut-off point" and "a safe harbor rather than a hard floor"; Tri-State held it "a method for the test to be met not as a requirement to meet the test"; and it appeared for the first time on March 1, 2021, after every 2020 quarter had closed.255 The statute asks whether a portion of the operation was suspended, and Tri-State holds that "portion" does not mean "significant."256 The portion of this industry's operation the orders reached was its sites, its crews, its permits, its materials, its subcontractors, its owners, its hiring, its offices and its workforce; in the shutdown markets it was the whole operation for weeks, and everywhere it was the site itself for the life of the caps and standards. The showing exceeds the United States' safe harbor many times over in every State: in the shutdown markets because the whole operation was terminated for weeks, and everywhere else because the site itself ran under caps, distancing rules, plans and standards for the life of those orders. It is measured by the statute's words, and it satisfies them. A number the United States has twice told courts is not a floor cannot be applied as one against a contractor whose site was ordered closed.
Ground 8. Masks, gloves, spacing and screening as nominal modifications
The required modifications (masks, gloves, spacing, screening) had only a nominal effect on operations (Q&A-18).
The modifications the orders required of this industry were not masks and gloves. They were the closure of sites; caps of four persons and of four per 2,000 square feet; crews of two, five and ten; six feet between workers on a framing line; a designated supervisor or Pandemic Safety Officer on every project; daily entry screening of every worker, contractor and supplier; a written plan, program or affidavit as a condition of the permit; paid exclusion of every case and close contact for ten to fourteen days; the suspension of toolbox talks, pre-shift and safety meetings in person; and attestation, testing or vaccination as a condition of entering federal, State-agency and health-care sites.257 Q&A-17's own rule is that a compelled modification partially suspends operations, and Tri-State held that screening, distancing, isolation, testing and reassignment protocols compelled by an order are a suspension the order caused.258 Q&A-18's masks-and-aisles sentence, added March 1, 2021 without force of law, addresses a retailer's aisle; it does not describe a construction site ordered to run at four persons or six feet apart. The position confuses the mask a worker wore with the crew the order dispersed.
Ground 9. A declaration is not an order
A declaration of emergency is not an order (Q&A-10).
The statute's word is "orders," and this analysis relies on no bare declaration as a suspending order; the ground answers an argument this analysis does not make. Where an emergency declaration itself commands or limits (Executive Order GA-38's terms; Alabama's proclamation of August 13, 2021; Georgia's Economic Recovery State of Emergency orders of June 30 and August 19, 2021), it is an order in the statute's sense whatever its caption, and the Notice's contrary treatment of declarations is a gloss the United States has represented carries no force of law. The instruments inventoried above are executive orders with operative commands, health officer orders with penalties, occupational-safety standards adopted under statute, legislative enactments, court orders, ordinances and directives; the emergency declarations are stated as the instruments under which those orders issued and were continued, and, where a declaration itself carried operative terms (Alabama's, Arkansas's, Rhode Island's and Georgia's of 2021 each did), for those terms.259 A Pennsylvania list that says "No" beside every construction industry group is not a declaration; it is an order.
Ground 10. The supplier was not closed; supply-chain effects too attenuated
The supplier was not itself closed by order; supply-chain effects are too attenuated (AM 2023-005).
The suppliers of this industry were closed by order: Pennsylvania closed its sawmills, wood product plants and lumber wholesalers; Michigan closed the paint, flooring and garden departments of its large retailers and its non-critical manufacturing; a dozen States closed manufacturing outside critical infrastructure; the United States allocated respirators, restricted the land borders and conditioned every vessel and port.260 Q&A-12 requires no closure of the supplier and no order against the employer; the United States told the Ninth Circuit that the rule "never even mentions a 'physical[ ] clos[ure]' order against the supplier," and Tri-State refused AM 2023-005, which "may not be used or cited as precedent," whose scenarios "are not comparable or persuasive," and whose "proximate" causation theory "improperly adds words into the statute."261 The Census Bureau's finding that 58.5 percent of construction small businesses reported domestic supplier delays in July 2021 is the measured consequence of the orders named. A document that cannot be cited as precedent does not amend the statute.
Ground 11. The orders had lifted
The orders had lifted before the quarter began; any effect was a lingering effect.
The orders had not lifted. The third-quarter inventory lists the instruments in force on every day of the third quarter of 2021, from the Cal/OSHA standard to Executive Order 14042, and its closing paragraph names the expired instruments on which the proof does not rest. Where an order had ended, the clause asks whether the operation was suspended "during the calendar quarter," not whether an order was in effect during it; Tri-State defines suspension to include "delay"; Q&A-22 makes an employer suspended for part of a quarter eligible for the whole of it; and the restoration arithmetic shows, from the orders' own reopening steps, that the crews, schedules, projects, permits and materials the orders dismantled were not restored on the day the last cap lifted.262 The Service's phrase is not in the statute. An operation that governmental orders held under compelled site conditions until May 31, 2021 was suspended during the quarter that began thirty days later, and the orders were its but-for cause.
Ground 12. No decline in gross receipts
The employer did not experience the required decline in gross receipts.
The gross-receipts prong is clause (II); the suspension prong is clause (I); the clauses are joined by "or," and Tri-State held them independent "by Defendant's admission," finding that "even Defendant's own argument is contradictory" when the United States argued otherwise.263 Congress wrote a numerical threshold into clause (II) and none into clause (I).264 This analysis does not rely on the gross-receipts prong, and a contractor whose receipts were carried by progress billings on contracts signed before the orders was partially suspended in every quarter in which its sites, crews, permits and owners were under orders. A test Congress placed in a different clause is not a condition of the clause this analysis applies.
Ground 13. Guidance, recommendations or best practices
The instruments relied on are guidance, recommendations or best practices, not orders.
The instruments relied on are the Pennsylvania Governor's and Secretary of Health's orders and the list they incorporate; the New Jersey Governor's executive orders under N.J.S.A. App. A:9-33 et seq.; the Michigan Governor's executive orders under MCL 30.403 and 10.31 and MIOSHA's rules under MCL 408.1024; the Washington Governor's proclamation under RCW 43.06.220 and the Department of Labor and Industries' rule under RCW 49.17; the Vermont Governor's addenda to Executive Order 01-20; the Boston Mayor's and Inspectional Services Department's order enforced through permits; the Bay Area health officers' orders under Cal. Health & Safety Code § 101040; the Virginia Safety and Health Codes Board's standard under Va. Code § 40.1-22(6a); the Occupational Safety and Health Standards Board's standard under Labor Code § 142.3; Oregon OSHA's rule under ORS 654.025; the New York Legislature's Labor Law § 218-b and the Commissioner of Health's designation; the President's Executive Order 14042 under the Federal Property and Administrative Services Act; the CDC's order under 42 U.S.C. § 264; OSHA's Healthcare ETS under 29 U.S.C. § 655(c); and the ordinances of Columbus, Dallas County and Clark County with civil penalties.265 Where a document was guidance (CISA's list; OSHA's construction alert), this analysis says so and relies on it only as the text a State order incorporated.266 The Pennsylvania construction guidance itself recites that enforcement "commenced on March 23, 2020, and is ongoing," and Florida's Executive Order 20-120, § 3 (May 9, 2020), reopened the barbershops and salons it named only under the measures the Department of Business and Professional Regulation prescribed, and the Department's implementing document, styled "Information," recited that from May 11, 2020 "the following restrictions are mandatory."267 An instrument that closes a site on pain of a citation is an order whatever its title.
Ground 14. The ordinary meaning of "order"
"Order" must be given its ordinary meaning.
Agreed. An order is "[a]n authoritative indication to be obeyed; a command or direction."268 Applied to the instruments listed: the Pennsylvania list commanded every construction business to close; New Jersey's Executive Order No. 122 commanded that physical operations "shall cease"; Michigan's Executive Order 2020-21 commanded that in-person work not necessary to sustain or protect life stop; Washington's Phase 1 requirements commanded a posted plan on pain of "the job being shut down"; the Cal/OSHA standard commands a written program and paid exclusion; the HERO Act commands a plan; Executive Order 14042 commands a contract clause; Columbus's Ordinance 2388-2021 commands face coverings, an airborne-transmission control, on construction sites and in every high-density occupational setting it names.269 Each is a command or direction to be obeyed, from an authority with power to give it, limiting commerce, travel or group meetings, due to COVID-19. On the ordinary meaning of the word, every instrument this analysis states as an order is one, and the Library holds each of them by exhibit number, with its issuer, its date and its operative clause. The ordinary meaning of "order" is the Service's ground; applied to the exhibits, it is the proof.
The Service is free to disagree about the weight of these instruments. It is not free to say they did not exist.