Government Appeals Ruling Expanding COVID-19 Tax Refund Limitations Period
The federal government has appealed a landmark U.S. Court of Federal Claims ruling that significantly expanded the time frame for filing federal tax refund lawsuits under COVID-19 disaster relief provisions. In its opening brief to the U.S. Court of Appeals for the Federal Circuit, the government argued that the lower court misconstrued Internal Revenue Code Section 7508A(d), erroneously transforming a statutory 60-day deadline extension into an automatic postponement lasting over three years. The appeal seeks to overturn the decision in Kwong v. United States and dismiss refund claims for older tax years as untimely.
The dispute centers on a taxpayer who filed a refund lawsuit in February 2023 for tax years 2007, 2010, and 2011. Under normal rules, taxpayers must bring refund suits within two years of an IRS claim disallowance notice under Section 6532(a)(1). However, the Court of Federal Claims held that Section 7508A(d) automatically postponed that limitation period throughout the broader COVID-19 disaster timeline, spanning from January 20, 2020, through July 10, 2023. Under that expansive reading, the taxpayer's lawsuit fell within the extended statutory period.
In challenging that interpretation, government attorneys asserted that Section 7508A(d) ties mandatory extensions strictly to the specific incident date declared by the president rather than the ongoing disaster incident period established by the Federal Emergency Management Agency. For the California disaster declaration relevant to the case, the government noted an incident date of January 20, 2020, which would yield a mandatory 60-day extension ending on March 20, 2020. The government pointed out that Congress deliberately chose the term incident date for Section 7508A(d) while using incident period in other sections of the Taxpayer Certainty and Disaster Tax Relief Act of 2019, reinforcing that the provision was never meant to create an open-ended suspension.
The government further argued that allowing an automatic three-year postponement under Section 7508A(d) undermines the administrative structure of disaster tax relief. According to the appeal brief, Congress structured the law with both mandatory 60-day extensions under subsection (d) and discretionary relief authority under subsection (a). If subsection (d) automatically suspended deadlines for years, Treasury administrative notices providing targeted relief during the pandemic, such as Notice 2020-23 and Notice 2021-21, would have been unnecessary. As alternative positions, the government argued that the postponement should have expired 60 days after the presidential declaration date in March 2020 or remained capped at one year under statutory limits and Treasury regulations.
This appeal directly affects business owners, property investors, and individual taxpayers who are monitoring or actively pursuing past refund claims that rely on extended COVID-19 statutory deadlines. If the Federal Circuit upholds the lower court decision, tens of millions of taxpayers could potentially assert older tax refund claims, exposing the U.S. Treasury to tens of billions of dollars in potential payouts. Conversely, if the Federal Circuit agrees with the government, taxpayers relying on extended limitations periods may find their refund claims barred as untimely.
For property owners and taxpayers evaluating prior-year refund opportunities or tax abatement requests, the ongoing appeal introduces substantial legal uncertainty. Taxpayers working with accounting professionals must carefully distinguish between confirmed administrative extensions granted by Treasury notices and the broader, disputed statutory postponement established in the lower court ruling. When compiling tax-preparation documentation for historic claims, rental property owners can use tools like HostHours to track detailed operational records and build precise factual packets for CPA review.
Source: Journal of Accountancy
