The Service's positions, answered
The Service's letters and examination reports rest on fourteen grounds. Each is answered below from the statute's text, from Tri-State, from the instruments with their exhibit identifiers, and from the United States' own representations. None survives the record. For an industry whose product is the group meeting, several of the grounds do not describe the industry at all.
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."
Form language of the Service's letters and Forms 886-A
For every quarter, the six-quarters section lists the orders in force on the quarter's first and last day, by issuer, date and terms, with exhibit identifiers, and the tables on this page tabulate them. For the third quarter of 2021 alone the list runs to more than eighty instruments: the federal conveyance, security-directive, entry, border, testing, sailing and workplace orders; Hawaii's statewide caps; Nevada's Directives 047, 049 and 050; the face-covering orders of seven States and the District, workplace infection-prevention and exposure-control requirements enforced against every venue; Washington's and California's large-event rules; the proof-of-vaccination orders of New York City, San Francisco, New Orleans and Honolulu; the Los Angeles County, Pasadena and King County orders; Savannah's cancellation of every event on City property; and the face-covering orders of more than thirty counties and cities.219 A form sentence that no orders were in effect is not the determination the United States described to the District Court:
"An employer can demonstrate eligibility if it can show, under the facts and circumstances, it was partially suspended ... That is done on a case-by-case basis."
Doc. 44 at 30 n.7
The National Taxpayer Advocate has recorded that the letters carrying the sentence were issued on analytics "rather than a prior examination."220 The sentence describes a quarter that did not occur; the Service does not know, or does not say, what record it consulted; and the Federal Register, the New York City Rules and the Hawaii Executive Orders are public records of which any court takes notice.
Ground 2. The essential designation and "remained open"
"The employer operated an essential business and remained open."
Form language of the Service's letters and Forms 886-A
The word "essential" is not in the statute. Where a State designated a florist's grocery line or a caterer's meal delivery essential, the designation permitted that line to operate; it exempted no reception, banquet, concert, convention or shoot from the gathering caps, venue closures, banquet conditions, event-plan requirements, production protocols or verification orders that applied to every business, and West Virginia's designation of weddings as "Essential" came with the six-foot condition that made every reception a distanced event.221 The Notice itself provides that an employer so designated "may be considered to have a partial suspension of operations if, under the facts and circumstances, more than a nominal portion of its business operations are suspended by a governmental order," and the United States told the District Court the same:
"[A]n employer could be considered to have a partial suspension due to the governmental order if it was required to suspend certain operations for certain purposes."
Doc. 44 at 15
No planner, venue, band, photographer, staging company or production company in the United States "remained open" in the spring of 2020 free to serve an event of the size it had sold; each remained open, where it remained open, under an order that fixed how many guests it could serve.222 An employer that "remained open" under an order that fixed the size of its product was partially suspended by that order. The ground mistakes a designation for an exemption; no order granted the exemption, and the position that one did is factually incorrect.
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."
Form language of the Service's letters and Forms 886-A
The statute says nothing of the source or addressee of the order; it asks whether the order limited "commerce, travel, or group meetings." The Notice's own list of qualifying orders includes "A State's emergency proclamation that residents must shelter in place" and "An order from a local official imposing a curfew on residents," both addressed to the public, and the United States quoted that list to the District Court as the statute's meaning and told the Ninth Circuit the same223:
"[A] business may be suspended 'due to' a government order addressing a third party."
Br. for Appellees at 41
The ground is, moreover, beside the point for this industry, whose orders were directed at business operations in terms: "Individuals, venues, and businesses must not host celebrations, receptions, private parties, or other social gatherings"; "occupancy of banquet, ballroom and event venues is limited to 25% of occupancy"; "wedding receptions, funeral repasts and other events at banquet facilities are subject to each of the following restrictions"; "Responsible Parties, including event venue and facility owners and/or operators, and event organizers (i.e., planners and producers), must comply"; "a covered entity shall not permit a patron, full- or part-time employee, intern, volunteer, or contractor to enter a covered premises without displaying proof of vaccination"; "wedding venues and the services required to conduct weddings" at twenty-five percent; "indoor catered events must be cancelled during the Pause."224 The position rewrites the statute and misdescribes the orders.
Ground 4. Comparable operations through telework
"The employer could have continued comparable operations through telework."
Form language of the Service's letters and Forms 886-A
"Comparable operations" and "telework" are not in the statute; Tri-State defines a partial suspension as a temporary delay, interruption or termination of a portion of the business, and a wedding, a gala, a convention, a concert or a shoot is not performed by telework.225 The Notice's own words confirm it. Q&A-15 provides that where "the closure of the workplace causes the employer to suspend business operations for certain purposes, but not others, it may be considered to have a partial suspension of operations due to the governmental order," and its Examples 2 and 3 find partial suspension wherever equipment, a facility or customers that cannot be served remotely were reached; Q&A-16 provides that where the physical work space is so critical that central tasks cannot be performed remotely "this factor alone indicates that the employer is not able to continue comparable operations"; Q&A-17 provides that a compelled modification with more than a nominal effect is a partial suspension.226 The reception hall, the stage, the dance floor, the set and the guest are the laboratory of Example 3. A planner who designed events by videoconference for dates the orders had cancelled did not continue "comparable operations"; that planner continued the portion of the operation the orders left it. The four comparable-operations factors first appeared in the Notice released March 1, 2021; the FAQs as posted April 29, 2020 contained none of them, and the 2020 determinations were made under a text that did not contain them.227 The position substitutes a word Congress did not write for the one it did.
Ground 5. Customers, not the employer (Q&A-13)
"The orders affected the employer's customers, not the employer (Q&A-13)."
Form language of the Service's letters and Forms 886-A
Q&A-13 addresses an employer that "responds to the lack of demand by suspending some or all of its operations." This analysis relies on no response to demand. It relies on orders that cancelled the industry's events by name, capped the rooms in which it holds them, closed its venues and production, conditioned every guest and contractor at its doors, revoked its permits and quarantined its staff, and it relies on the stay-at-home orders on its customers as orders limiting commerce, travel and group meetings under the statute's text, Q&A-12's logic and the United States' representation that a third-party order counts.228 A gathering cap does not reduce demand for a reception of 150; it forbids the reception. A stay-at-home order on the couple, the family and the corporate customer is itself an order limiting commerce, and the commerce it limited was this industry's. The exclusion the ground invokes was, as posted April 29, 2020, confined to "an essential business that is not required to close its physical locations or otherwise suspend its operations" claiming a suspension "for the sole reason" of its customers' order; the Notice released March 1, 2021 extended it to every employer and to any "reduction in demand." The broadened exclusion has no force of law and did not exist when the 2020 determinations were made.229 Q&A-13 describes an auto-repair shop whose customers stayed home; it does not describe a banquet hall ordered not to host receptions, and the Service's invocation of it against this industry misdescribes both the orders and the industry.
Ground 6. Voluntary measures (Q&A-14)
"The employer's measures were voluntary (Q&A-14)."
Form language of the Service's letters and Forms 886-A
A reception cancelled because Minnesota ordered that venues "must not host ... receptions," a room held to twenty-five percent because North Dakota's order said so, a guest list cut to fifty because New York's Executive Order 202.45 said so and a door verified because Key to NYC said so are not voluntary. Q&A-14 describes an employer that closes without any order; every modification relied on here is traced to an order with an exhibit identifier.230 Where a national planner, rental company or production company adopted a nationwide policy to comply with the orders of the jurisdictions that bound it, Q&A-20 makes it eligible "with respect to all of its operations in all locations."231 Tri-State holds that "the required protocols and procedures to comply with the Proclamation" were caused by the order and "were not voluntary."232 A modification traced to an order with an exhibit identifier is not voluntary, and the position that it was describes an employer this analysis does not describe.
The ground fails at its premise as well. 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."233 No venue, planner, vendor or production company in this industry answered that description in any quarter. The reopening orders permitted operation only on conditions with the force of law: Texas's GA-21 and GA-28 under Government Code section 418.173, Florida's Phase 2 conditions under sections 252.47 and 252.50, Georgia's "shall implement," New York's "must be operated subject to," Nevada's "must" and "shall," Connecticut's "legally binding and enforceable" Sector Rules and California's "necessary modifications."234 The standing statutes commanded the same conduct independently: Texas Health and Safety Code section 81.002 ("Each person shall act responsibly to prevent and control communicable disease") and Labor Code section 411.103, their equivalents in the other six States, and in every State the general duty clause, 29 U.S.C. § 654(a)(1), enforced by citation from September 2020.235 The legislatures then fixed the standard of care as compliance with governmental standards, guidance and protocols, in Texas and Florida retroactively to the first days of the emergency and in Nevada from August 11, 2020.236 The safe-workplace statutes had no COVID-19 content until the health authorities said what a safe workplace required; the measures 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;237 the Notice itself treats a modification "required by a governmental order as a condition of reopening" as a partial suspension due to the order.238 A statute that commands conduct is an order from an appropriate governmental authority, and a legislature, a health department, a labor department and an occupational-safety agency are each such an authority. The Service's premise, an employer on whom no command operated, fails wherever a command reached the employer, and one reached every employer in this industry on every day of the six quarters; the standing-duties subsection of the layers section sets them out.
Ground 7. The ten percent figure as a floor
"The portion of the business affected was not more than nominal (the 10 percent figure applied as a floor)."
Form language of the Service's letters and Forms 886-A
The ten percent figure is, in the United States' words, "not determinative," "a quintessential safe harbor," "a safe harbor rather than a hard floor"; the District Court held it "is not an exclusionary cut-off point"; and Tri-State held that the Notice "provides a method for the test to be met not as a requirement to meet the test" and that reading it as a requirement "would read requirements into the statute that do not exist."239
"Effectively, this is a safe harbor ... Properly understood, it isn't an eligibility requirement."
Doc. 44 at 14
The showing for this industry exceeds the safe harbor many times over: an industry whose product was prohibited outright in forty-two jurisdictions (Ex. LAW-201) for the spring of 2020, capped at ten to fifty for the summer and winter, prohibited again by name in the largest Midwestern and Western markets for the holiday season, held to ten to 150 through the spring of 2021 and conditioned at every door in its largest markets in the fall of 2021 did not lose ten percent of anything; it lost the product. The figure also has a date. As posted April 29, 2020 the Service's FAQs contained no "nominal" test and no percentage; the words "more than a nominal" first appeared on June 19, 2020; the ten percent deeming rules first appeared in the Notice released March 1, 2021; and the Service's current FAQ page and AM 2023-007 administer ten percent as the definition of "more than nominal" while the United States told two courts it is a safe harbor.240 A figure that did not exist when the 2020 determinations of employers in this industry were made, and that its author disclaims in court, cannot be the floor beneath those determinations. The position applies as a floor a figure the United States has told two federal courts is not one.
Ground 8. Modifications with only a nominal effect (Q&A-18)
"The required modifications (masks, gloves, spacing, screening) had only a nominal effect on operations (Q&A-18)."
Form language of the Service's letters and Forms 886-A
The modifications relied on here are cancellation, numeric caps, percentage caps, closing hours, seated service and no dancing, plans filed in advance, notice to health departments, sign-in of every attendee, testing or vaccination of every guest and contractor, production protocols, permit revocations and quarantine of staff; the face-covering orders of July through September 2021 are relied on as what they are, workplace infection-prevention and exposure-control requirements imposed by appropriate governmental authorities, enforced by fine, that conditioned every venue, florist's shop, studio and set in the jurisdictions that issued them and imposed on the business, in the jurisdictions whose orders so provided, a duty to post the rule and to exclude the uncovered person. Q&A-18 itself lists "limiting occupancy to provide for social distancing" and "requiring services to be performed only on an appointment basis" among the modifications "required by a governmental order as a condition of reopening," and provides that a modification "that results in a reduction in an employer's ability to provide goods or services in the normal course of the employer's business of not less than 10 percent will be deemed to have more than a nominal effect." The United States told the District Court the same of face coverings:
"[E]mployees having to wear face masks may impact business operations."
Doc. 44 at 30
Tri-State held that "the required protocols and procedures to comply with the Proclamation" were suspensions the order caused and refused the argument that they were nominal.241 The sentence declaring that mask and one-way-aisle requirements "will not result in more than a nominal effect" first appeared in the Notice released March 1, 2021; no FAQ carried it in 2020, and the second-quarter 2020 determinations of employers in this industry were made under guidance that contained no such sentence.242 A reception hall at twenty-five percent is not a modification with a nominal effect; it is a seventy-five percent closure. A reception with no dancing is not the reception that was sold.
Ground 9. A declaration of emergency is not an order (Q&A-10)
"A declaration of emergency is not an order (Q&A-10)."
Form language of the Service's letters and Forms 886-A
This analysis relies on no bare declaration as a suspending order. Each instrument in the layers and six-quarters sections limited commerce, travel or group meetings in terms. Where an emergency declaration is cited, it is cited as the instrument under which those orders were issued and continued and as the predicate their enforcement clauses recite. The Notice's own text excludes only a declaration that "does not limit commerce, travel, or group meetings in any manner"; a declaration that itself limited them is relied on as the order it is.243 The ground answers an argument this analysis does not make.
Ground 10. The supplier was not itself closed by order (AM 2023-005)
"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
Chief Counsel memoranda "may not be used or cited as precedent," by their own legend, which Tri-State quoted in declining to rely on the one the United States offered there.244 The suppliers of this industry are the venue closed or capped by order, the caterer under seated-service rules, the hotel ballroom closed to meetings, the fair cancelled under the State gathering orders (and by executive order in Illinois and Vermont, Ex. IL-018; Ex. VT-025), the convention hall closed under the State closure and gathering orders (the authorities' own releases recording the closures, Ex. AGY-LOCAL-DISTRICTS-AUTHORITIES-027; Ex. AGY-LOCAL-DISTRICTS-AUTHORITIES-033; Ex. AGY-LOCAL-DISTRICTS-AUTHORITIES-044; Ex. AGY-LOCAL-DISTRICTS-AUTHORITIES-055, cited as context), the plant closed by the non-essential manufacturing order, the county health officer whose protocol governs the set and the consulate closed by the State Department; each was closed or conditioned by an order with a date and an exhibit identifier, and the fair boards' and authorities' releases are the record of what those orders compelled; nothing here is attenuated. The United States told the Ninth Circuit that the supplier rule "never even mentions a 'physical[ ] clos[ure]' order against the supplier," and told the District Court that an employer is eligible where its operations are suspended "because of the supplier's inability to deliver."245 Causation is but-for on the United States' own agreed definition: absent the order capping the ballroom, no law kept the reception out of it.246 The position describes an attenuated chain this analysis does not describe; a banquet hall closed by order is not a supply-chain effect, and a Chief Counsel memorandum that cannot be cited as precedent is not the statute.
Ground 11. The orders had lifted before the quarter began
"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
For the third quarter of 2021 the orders had not lifted: the third-quarter subpart (B) of the six-quarters section lists with dates the orders in force on July 1 and September 30, 2021, more than thirty of them issued inside the quarter, and its closing paragraph, "What this analysis does not claim was in force," names the expired instruments on which the proof does not rest. Where the position means that a suspension compelled by an order that expired on June 30 ended at midnight, it misreads the clause, which asks whether the operation "is fully or partially suspended during the calendar quarter," and it contradicts Tri-State's definition of a suspension as a "delay," Q&A-22's whole-quarter rule and Q&A-16's transition rule.247 A venue released from a fifteen-month cap on June 15 had, on July 1, the staff, the calendar and the vendor chain the cap had left it; the interconnected-economy section states the arithmetic from the orders' own dates. The position mistakes the date an order lapsed for the date the suspension it compelled ended; the clause asks about the second.
Ground 12. No decline in gross receipts
"The employer did not experience the required decline in gross receipts."
Form language of the Service's letters and Forms 886-A
The gross-receipts prong is not relied on. The statute makes an employer eligible on either prong, and the United States admitted in Tri-State that the gross-receipts test is "another method to qualify," on which the court held "the fact an employer can be eligible and affected without partial or full suspension is reasonable."248 The suspension prong asks about operations, not revenue, and it is satisfied in every quarter. The ground answers a prong this analysis does not invoke; Congress joined the two prongs with "or."
Ground 13. Guidance, recommendations or best practices
"The instruments relied on are guidance, recommendations or best practices, not orders."
Form language of the Service's letters and Forms 886-A
Every instrument this analysis relies on as a suspending order is an order, proclamation, rule, directive, statute or administrative order with the force of law, issued under a recited statutory or constitutional power and enforced by penalty, contempt, license or permit: New York's executive orders under Executive Law § 29-a with the $15,000-a-day penalty of Executive Order 202.68; New York City's Emergency Executive Order 225 with fines of $1,000, $2,000 and $5,000; Hawaii's Executive Order 21-05 under Haw. Rev. Stat. ch. 127A with its misdemeanor; New Mexico's face-covering order with its $5,000 civil penalty; New Orleans's rules under La. R.S. 29:727 with a $500 fine and six months' confinement; Nevada's directives under NRS 414.190; Washington's proclamations and orders under RCW 43.06.220 and 70.05.120; Texas's GA-21 under Tex. Gov't Code ch. 418; the county health officers' orders under Cal. Health & Safety Code §§ 101040 and 120295.249 Where a State made a guidance document binding by incorporating it into an order (New York's Interim Guidance under Executive Order 202 and its successors; Illinois' Department of Commerce guidance under Executive Order 2020-38; Connecticut's sector rules under Executive Order 7ZZ; New Hampshire's under Emergency Order #52; North Dakota's Smart Restart standards under Executive Order 2020-43; Utah's Event Management Template under its public health orders), the binding instrument is the order, and it is the order that is cited.250 Where a regulator's release or a fair board's announcement is cited, it is cited as the authority's own record of the order it implemented, and the order is the instrument relied on; announcements are cited as context throughout. The Notice itself provides that whether an instrument is a governmental order "is determined without regard to the level of enforcement."251 An instrument enforced by fine, contempt, license or permit is not a recommendation, and the position that it is misdescribes every instrument this analysis names.
Ground 14. The ordinary meaning of "order"
"'Order' must be given its ordinary meaning."
Form language of the Service's letters and Forms 886-A
Agreed. An "order" is "[a]n authoritative indication to be obeyed; a command or direction," and the United States agreed in Tri-State that the clause is read by "plain meaning."252 Every instrument in the findings of the six-quarters section is a command from a competent authority to do or refrain from doing something on pain of sanction: cancel the gathering; admit no more than fifty; hold the room at twenty-five percent; host no reception; file the plan; verify the guest; wear the face covering; stay home. That is the ordinary meaning, and it is satisfied.
The Service is free to disagree about the weight of these instruments. It is not free to say they did not exist.