The statute allowing the IRS to extend deadlines in response to declared disasters was amended in late 2019 as part of a tax extenders bill, and the new provision could provide even broader coronavirus relief than the IRS already has.
The appropriations bill (P.L. 116-94) that included tax extenders enacted in December 2019 included a new section 7508A(d), which adds a mandatory 60-day extension period to the relief granted under section 7508A(a), the provision the IRS has been using for coronavirus-related deadline extensions.
The new subsection provides a period disregarded in the same way as other disaster deadline extensions that starts with the date specified in a disaster declaration and ends 60 days after “the latest incident date.”
The new extensions apply to taxpayers in federally declared disaster areas.
Speaking April 29 on a webcast sponsored by the American Bar Association Section of Taxation, Sheri A. Dillon of Morgan, Lewis & Bockius LLP noted that the disaster declarations regarding the coronavirus pandemic seem to sweep just about everyone in the country into section 7508A(d). She added that the newness of the provision raises several interesting questions.
For example, “I'm not sure if it actually captures taxpayers residing outside the United States,” Dillon said. Another question arises from the description of the end of the extension because the disaster declarations don’t refer to one, she said. In other words, the section 7508A(d) extension period could last far longer than the July 15 deadlines already granted by the IRS, she suggested.
Dillon noted that the House appears to have added the provision to grant disaster victims more time and certainty.
Drita Tonuzi, IRS deputy chief counsel (operations), noted that when Congress enacted section 7508A(d), it hadn't encountered a nationwide disaster like the pandemic, in contrast to the regional or local disasters like tornadoes and hurricanes. “We will respond appropriately, and we recognize that there are unique challenges that new statutes present to taxpayers,” she said, adding that taxpayer and practitioner input would be helpful.
On April 28 the IRS clarified that it thinks the Tax Court’s petition filing extension and its own coronavirus relief operate together. However, the IRS’s guidance starts on April 1 and the Tax Court’s when it closed its clerk’s office on March 19.
Counting Court
Dillon said taxpayers who may have missed Tax Court petition filing deadlines between January 20, the date stated in the disaster declarations, and March 19 should consider the potential impact of section 7508A(d) on their ability to preserve their legal challenges.
Tonuzi addressed concerns that chief counsel attorneys have asserted untimely petition filing arguments contrary to the IRS’s position. She said that while the position of chief counsel is that the Tax Court was correct in Guralnik v. Commissioner, 146 T.C. 230 (2016), the national office didn’t issue a formal acquiescence.
“There wasn't anything that they could turn to that said, you know, we agreed with the results of Guralnik. So I can see why that may have happened,” Tonuzi said.
In Guralnik, the Tax Court decided that the last day of the period for filing a petition with the court couldn’t fall on a day when the court’s clerk’s office was unavailable. While the case involved a snowstorm, the court has used it as its primary guidance for potential petitioners during the pandemic.
Dillon said the pandemic highlights the need for a legislative solution to the potentially inequitably harsh results caused by the unavailability of equitable tolling for the time limits on filing Tax Court petitions. She said that Congress could either go through each statute, setting a deadline for filing in the Tax Court, or it could use a separate omnibus provision.
A legislative fix should include an amendment to section 7459(d) to clarify that petitions dismissed for late filing — even if no longer for lack of subject matter jurisdiction — don’t involve the merits of the tax positions, Dillon said. That would preserve a late filer’s ability to pay the tax and sue for a refund, she said.
Virtual Settlement Days
Tonuzi said IRS attorneys’ virtual conference capabilities may prove helpful to unrepresented Tax Court petitioners. The IRS is currently arranging two virtual settlement days, in Detroit and Atlanta in May, she said.
“So we're looking forward, number one, to doing it, and number two, learning how to better provide virtual settlement days,” Tonuzi said.
Settlement days are generally organized ahead of Tax Court calendar calls to give pro se petitioners access to free legal advice and the chance to resolve their tax disputes. Perhaps more importantly, the events — sometimes called pro bono days, settlement conference days, or other variations — allow the petitioners to discuss their cases with the IRS in an environment more conducive to tax advice than a courthouse hallway.
The use of video conferencing has long been a part of some settlement day programs, but it hasn’t been used everywhere.