Court Holds COVID-19 Disaster Relief Suspended Certain Federal Tax Deadlines: Action May Be Required Now

In Kwong v. United States, the U.S. Court of Federal Claims held that certain statutory disaster-relief provisions postponed federal tax deadlines during the COVID-19 pandemic, notwithstanding IRS guidance and U.S. Treasury regulations to the contrary, 179 Fed. Cl. 382 (2025). The decision has significant implications for refund claims, interest and penalty assessments, as well as other tax filing and reporting deadlines.

The decision turns on the interaction between two provisions of the Internal Revenue Code. Section 6532(a) generally requires a taxpayer to file a refund suit within two years after the IRS issues a notice of claim disallowance (typically an IRS 105C letter). Failure to meet this jurisdictional deadline can bar a refund suit, even if the claim is otherwise appropriate. Section 7508A(d), as in effect during the COVID-19 disaster period, provides a mandatory postponement of certain tax deadlines for taxpayers affected by a federally declared disaster. The court concluded that the COVID-19 disaster-relief period ran from January 20, 2020, to May 11, 2023.

Applying the plain text of section 7508A(d), the court held that the entire COVID-19 disaster-relief period, plus the additional 60-day statutory restart period, must be disregarded when computing the two-year limitations period under Code section 6532(a). The President declared that the disaster period began on January 20, 2020. When the President declared the pandemic to be over on May 11, 2023, the deadline clock reactivated once the 60-day statutory restart period ran (i.e., on July 10, 2023). Because the limitations period to file suit did not run during the entire COVID-19 disaster period, the taxpayer's refund suit was timely.

In reaching its conclusion, the court rejected the IRS's reliance on Treasury Regulations that purported to cap the mandatory postponement period at one year. Citing Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), the court noted that the IRS's reading of the statute is not dispositive, and agency interpretations cannot narrow unambiguous statutory language. The court also noted that Congress amended section 7508A in 2021 to limit future disaster-related extensions, but that amendment applied only to disasters declared after its enactment and therefore did not apply to COVID-19. The court observed that while Congress may not have anticipated a disaster declaration lasting more than three years, the statute's express text nevertheless applies.

Why This Matters

The Kwong decision may affect taxpayers whose statutory deadlines were running during the COVID-19 disaster-relief period. In addition to allowing refund suits that might otherwise appear untimely, the decision raises questions about interest and penalties assessed during that period. Although the court did not directly address the assessment of interest or penalties, its conclusion that statutory deadlines were postponed during COVID-19 may have implications for certain tax consequences that depend on a filing date or deadline, including failure-to-file and failure-to-pay penalties and other deadlines such as electing portability on an Estate Tax Return (Form 706).

The statute at issue, Section 7508A, has been applied to acts such as filing a tax return, filing a refund claim, bringing suit, and any other "act required or permitted under the internal revenue laws specified by the Secretary." See Code § 7508A(a)(1).

What Taxpayers Should Consider

Taxpayers and advisers may wish to review whether interest or penalties were assessed during the period from January 20, 2020, through July 10, 2023, particularly where those charges were tied to filing or payment deadlines. Tax elections that were missed during this period may also have been extended. Thus, taxpayers may consider filing refund or abatement requests, including protective refund claims and any late tax elections that appear to have been missed, to preserve potential rights while further judicial review or IRS guidance develops.

The IRS is widely expected to appeal the Kwong decision.

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