The Service's Positions, Answered
The Service's letters and examination reports rest on fourteen grounds. Each is answered here from the statute's text, from Tri-State, from the instruments themselves and from the United States' own representations to two federal courts. None survives.
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 every quarter, the six-quarter section above lists the orders in force on the quarter's first and last day, by issuer, date and terms, with exhibit identifiers, and the State and quarter tables on this page tabulate them. For the third quarter of 2021 alone the list runs to the federal conveyance, port, rail, border, entry, Title 42, testing, inspection, health-care and contractor orders, the occupational standards of five States, New York's activated plans, the indoor face-covering orders (workplace infection-prevention and exposure-control requirements) of seven States, the District and the freight hubs listed in the third-quarter inventory, the vaccination-proof orders of four cities and the emergencies of twenty-five States. A form sentence that no orders were in effect is not the determination the United States described to the District Court:167
"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 sentence describes a quarter that did not occur, and the Service's records, whatever they contain, do not contain the Federal Register.
2. The essential designation and remaining open
"The employer operated an essential business and remained open."
The word "essential" is not in the statute. The designations permitted operation; they exempted no dock from New Jersey's eleven rules, no wholesale floor from New York's fifty percent cap, no warehouse from OSHA's inspection list, no cab from the conveyance order, no crossing from the border notices and no driver from a State's quarantine line.168 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:169
"[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
The Service's own history confirms the answer. Its FAQ 30 of April 29, 2020 stated the designation categorically; on June 19, 2020 the Service qualified it, adding the partial-suspension pathway for designated employers that the Notice carries as Q&A-11; and on March 1, 2021 it fixed a ten percent figure to that pathway in a document the United States says has no force of law. The customer sentence ran the same course: FAQ 32 of April 29, 2020 confined it to a business designated essential and "not required to close its physical locations or otherwise suspend its operations" claiming a suspension "for the sole reason" of its customers' stay-at-home order, and Q&A-13 of March 1, 2021 widened it to any "reduction in demand."170 The designation was a permission to operate under the orders, not an exemption from them. An employer that "remained open" under an order that fixed how open it could be was partially suspended by that order; Pennsylvania's five wholesale lines were not open at all.
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 addressee. The Notice lists "[a] State's emergency proclamation that residents must shelter in place" as a governmental order, and the United States told the District Court that the qualifying instruments are "orders, proclamations, or decrees from the Federal government or any State or local government" that limited "commerce, travel, or group meetings."171 For this industry the point is doubly foreclosed: the stay-at-home orders confined the public whose purchases moved the freight, and the same orders closed the docks the freight was delivered to; the United States has represented that "a business may be suspended 'due to' a government order addressing a third party."172 A reading under which an order addressed to the public is not such an order is a reading Congress did not write and the United States has disclaimed.
4. Comparable operations through telework
"The employer could have continued comparable operations through telework."
Drivers, dock workers, pickers, mechanics and port labor do not telework, and the Notice's own comparable-operations gloss is confined to an employer whose workplace was closed and that "is able to continue operations comparable to its operations prior to the closure, including by requiring its employees to telework"; it has no application to an operation the orders required to be performed in person under compelled conditions.173 Where the industry's offices were sent home by New York's, New Jersey's, Pennsylvania's and Michigan's mandates, the dispatch and administrative functions were themselves suspended in part by those mandates, and the Notice's fourth factor treats the transition as part of the suspension.174 The words "comparable operations" and "telework" are not in the statute, and a gloss that has no force of law cannot exclude an operation the statute's words include.
5. The orders affected the customers, not the employer
"The orders affected the employer's customers, not the employer (Q&A-13)."
The commerce the customer orders limited was this industry's commerce: a closed store received no load, a closed restaurant ordered no case, a closed plant tendered no shipment, a hospital under a visitor ban admitted the driver on its own terms. Q&A-13 as posted on April 29, 2020 reached only a business designated essential and "not required to close its physical locations or otherwise suspend its operations" that claimed a suspension "for the sole reason" of a stay-at-home order; the Notice of March 1, 2021 extended it to any "reduction in demand," a change the United States says has no force of law.175 Q&A-12, which the United States has read to the Ninth Circuit as reaching "a government order addressing a third party," makes the supplier's order the employer's order, and a receiver is a supplier of the dock the carrier needs.176 Tri-State fixed causation at but-for; but for the closure orders, no law closed the receiving dock.177 The Service's gloss treats the closed dock as the customer's affair; the load that was not delivered was the carrier's.
6. The measures were voluntary
"The employer's measures were voluntary (Q&A-14)."
New Jersey's Executive Order 122 begins "must adopt policies that include, at minimum, the following requirements"; New York's guidance states "These guidelines are minimum requirements only"; Ohio's sheet is headed "Mandatory"; the conveyance order says "must wear"; Washington's rule is enforceable by citation; New York's statute carries penalties to $20,000; Clark County's ordinance suspends business licenses; Mecklenburg's rule authorizes "shutting down a facility's operations."178 Nothing on this page rests on a measure an employer adopted without an order requiring it; every modification described is traced to the instrument that compelled it, and Tri-State held that "the required protocols and procedures to comply with the Proclamation" are the suspension the order caused.179 An instrument that begins "must" and ends with a penalty is not a suggestion, and an employer that obeyed it did not volunteer.
Q&A-14 reaches, by its own terms, 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."180 No carrier, warehouse or wholesaler in Texas, California, New York, New Jersey, Ohio, Indiana, Florida or North Carolina answered that description in any quarter. The reopening orders permitted operation only on conditions with the force of law, "shall operate at no more than," "must be operated subject to," "is required to abide by," "shall continue to comply," "shall develop a plan," each carrying the penalty its emergency or health act attached.181 The standing statutes commanded the same conduct independently of any order: Texas Health and Safety Code § 81.002 ("Each person shall act responsibly to prevent and control communicable disease"), North Carolina's "All persons shall comply with control measures," Indiana's "shall not institute, permit, or maintain any conditions that may transmit, generate, or promote disease," the safe-workplace statutes and the general duty clause, 29 U.S.C. § 654(a)(1), enforced by citation from September 2020 and against a general warehousing employer in April 2021.182 The Legislatures of Texas and Florida then fixed the standard of care as compliance with governmental standards, guidance and protocols.183 The safe-workplace statute had no COVID-19 content until the health authorities said what a safe workplace required; the distanced dock, the screened shift, the masked floor and the emptied office 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.184 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.185 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 did in every State and every quarter.
7. Not more than nominal: the ten percent figure applied as a floor
"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' words, "not determinative," "a quintessential safe harbor," "a safe harbor rather than a hard floor":186
"Effectively, this is a safe harbor ... Properly understood, it isn't an eligibility requirement."Doc. 44 at 14
"[T]he ten percent standard is not an exclusionary cut-off point, but rather a safe harbor above which the IRS will consider there to have been a more-than-nominal disruption to business."Doc. 49 at 26
Tri-State held it "a method for the test to be met not as a requirement to meet the test." A letter that applies it as a floor applies as law what the United States told two courts is not law. The Service's FAQ page and AM 2023-007, which administer the figure as the definition of "more than nominal," cannot be squared with the United States' representations, and this analysis holds the United States to the representations.187 The statute's word is "portion," and Tri-State refused to read "more than nominal" as "significant."188 The portions this page identifies (every cross-border lane, every port and rail move, every wholesale line Pennsylvania closed, every warehouse floor rebuilt to half occupancy, every driver not hired for want of a test, every receiver's dock closed or conditioned) are more than nominal under any measure, including the United States' own safe harbor, which the showing for this industry exceeds many times over.
8. The required modifications had only a nominal effect
"The required modifications (masks, gloves, spacing, screening) had only a nominal effect on operations (Q&A-18)."
The Notice's own list of compelled modifications includes "requiring employees and customers to wear face coverings," and the United States told the District Court that "employees having to wear face masks may impact business operations" and that "orders that were otherwise directed at business operations (operational hours, space, etc.) would also be considered."189 The masks-and-aisles sentence and the second ten percent rule first appeared on March 1, 2021, after every one of the three claimable quarters of 2020 had closed under FAQs that contained neither; the June 19, 2020 FAQ kept its unqualified "Yes" for a closed purpose and added "more than a nominal effect" only where "all of an employer's business operations may continue."190 The modifications described here are not masks alone; they are workplace infection-prevention and exposure-control regimes: fifty percent occupancy, six-foot spacing "at all times," staggered shifts and breaks, visitor bans, daily screening, ten- to fourteen-day exclusions of exposed workers with pay, written plans with penalties, sole-occupant cabs, documented border crossings, attestation at every federal gate and programmed inspection. Tri-State held that "[s]ick patients and employees alone did not require additional protocols"; the orders did.191
9. A declaration of emergency is not an order
"A declaration of emergency is not an order (Q&A-10)."
Agreed, and this analysis relies on no bare declaration as a limitation. The emergencies of twenty-five States in the third quarter of 2021 are relied on as the predicates under which the health officers, occupational-safety agencies and local governments issued the orders that are relied on, and the Notice itself excludes a declaration only where it "does not limit commerce, travel, or group meetings in any manner" or does so "in a manner that does not relate to the suspension of an employer's operation."192 FMCSA's declaration is relied on as posture only.193 Every instrument in the six-quarter findings for each quarter is a command with a sanction.
10. 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)."
AM 2023-005 says of itself that it "may not be used or cited as precedent"; Tri-State refused to weigh such a memorandum; and the United States told the Ninth Circuit that Q&A-12 "never even mentions a 'physical[ ] clos[ure]' order against the supplier."194 For this industry the suppliers were closed by order: Michigan's, Ohio's, Indiana's and Pennsylvania's plants in the spring of 2020; every non-essential shipper and receiver in the closure States; the motor-vehicle offices; the plazas and lodging; the ports and borders under federal orders that remain exhibits in the Library. The chain is one link long, and the link is an order. Tri-State fixed causation at but-for, and the United States agreed that "due to" means "because of."195
11. The orders had lifted before the quarter began
"The orders had lifted before the quarter began; any effect was a lingering effect."
For the third quarter of 2021 the premise is false: the third-quarter inventory above lists the orders in force on July 1 and on September 30, 2021, and the finding rests on them. For every quarter, the clause asks whether the operation "is fully or partially suspended during the calendar quarter due to orders," not whether an order was in effect during the quarter; a suspension is "[t]he act of temporarily delaying, interrupting, or terminating something" on the United States' agreed definition; and the Notice's Q&A-22 makes an employer suspended for part of a quarter eligible for the whole of it.196 The orders' own reopening steps fix how long the compelled dismantling took to reverse, and the interconnected-economy section above states the arithmetic from the orders' dates. This analysis uses the term "continuing suspension" for that proposition, because that is what the statute's words describe.
12. No decline in gross receipts
"The employer did not experience the required decline in gross receipts."
The gross-receipts prong is an alternative, not a requirement. The clause reads "or," and Tri-State held the prongs independent "by Defendant's admission," finding "even Defendant's own argument is contradictory" when the United States argued that the gross-receipts prong narrowed the suspension prong.197 An employer whose receipts rose because its customers' orders re-routed to it, or because freight rates rose under the very congestion the orders produced, was partially suspended if its operation was delayed, interrupted or terminated in part because of orders; the statute does not ask what the suspension cost.
13. Guidance, recommendations or best practices
"The instruments relied on are guidance, recommendations or best practices, not orders."
Every instrument in the six-quarter findings is an order, proclamation, rule, statute, directive or ordinance with a sanction, and each is quoted from its own text. A federal order enforceable under 42 U.S.C. § 271 and 18 U.S.C. § 3559; that order as applied at every sea port through the Captains of the Port's order authority, which the Coast Guard's bulletins record; a Federal Railroad Administration emergency order with civil penalties; a Department of Homeland Security notice under 19 U.S.C. § 1318(b) prohibiting non-essential travel; a Governor's executive order with criminal penalties; an occupational-safety standard enforceable by citation; a statute with penalties to $20,000; a county ordinance suspending business licenses; a Board of Health rule enforceable by closure.198 The guidance documents of the period (OSHA's warehouse and trucking alerts, the CDC's considerations, FMCSA's frequently asked questions, the CISA list standing alone) are described as guidance and ground no finding; the CISA list acquired force through the State orders that adopted it, and each of those orders is cited; and the Coast Guard's Marine Safety Information Bulletins, the motor-vehicle agencies' closure notices and the Department of Transportation's enforcement statements are described as the agencies' records of the orders, closures and limitations they implemented, cited for that fact and not as orders.199 The Notice's own exclusion reaches "[s]tatements from a governmental official, including comments made during press conferences," and nothing relied on here is such a statement.200 A rule filed in a State's administrative code with a five-hundred-dollar daily penalty is not a press conference.
14. "Order" must be given its ordinary meaning
"'Order' must be given its ordinary meaning."
Agreed. An "order" is "a specific rule, regulation, or authoritative direction" and "an authoritative indication to be obeyed; a command or direction"; the Service's own Chief Counsel defines it as "a command or mandate delivered by a government official"; and the United States agreed in Tri-State that the clause is read by "plain meaning."201 Every instrument in the six-quarter findings is a command from a competent authority to do or refrain from doing something on pain of sanction. 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.