How Late Is Too Late to Challenge Old Tax Regs?

I. Introduction

Old tax regs are having a moment.¹ This year in Valley Park Ranch,² the Tax Court invalidated a 1986 Treasury regulation concerning conservation easements and the division of sale proceeds. Meanwhile, corporate taxpayer 3M is appealing a Tax Court decision that narrowly upheld a 1994 regulation on transfer pricing requirements for blocked income.³ In both cases, the Tax Court considered claims that Treasury made administrative procedure mistakes, like failing to correctly follow notice and comment requirements, when it promulgated those regulations decades ago.⁴

But as other recent cases show, the government can defend against these procedural challenges with the six-year limitations period of 28 U.S.C. section 2401(a). In Townley,⁵ a federal district court time-barred an administrative procedure challenge to another provision from the same 1986 conservation easement regulations at issue in Valley Park Ranch. In Govig,⁶ another district court time-barred procedural challenges to Notice 2007-83, 2007-45 IRB 960, concerning tax shelter employee benefit arrangements. The recent Supreme Court decision in Corner Post⁷ — which held that the six-year limitations period accrues later, when a plaintiff acquires the right to sue, for substantive ultra vires claims — still allows the government to pursue the six-year time bar argument for procedural challenges to old tax regs.

Cases about old regs present a tension between the importance of adequate administrative procedure and the value of certainty in the law. A classic tool — a limitations period — balances these two concerns. The relevant statute, 28 U.S.C. section 2401(a), says that “every civil action commenced against the United States shall be barred unless the complaint is filed within six years after the right of action first accrues.” It provides the default limitations period for claims against the federal government,⁸ including administrative procedure claims and some other claims in tax.⁹ It is an exception to sovereign immunity, meaning a condition of the United States’ agreement to be sued.¹⁰

Given this six-year time bar, how could the 2024 Valley Park Ranch decision invalidate a 1986 reg on the basis that Treasury failed to respond to a comment made in the notice and comment process? And why would the Tax Court or the Eighth Circuit even consider a challenge based on Treasury’s alleged failure to adequately explain the 1994 transfer pricing reg at issue in 3M?

A short answer is that the limitations period is a nonjurisdictional affirmative defense.¹¹ That means that the government has to raise it, typically in the answer to a complaint or initial pleading.¹² The government has not raised the limitations period as a defense in Valley Park Ranch or 3M. In general, a defendant can raise such a time bar later in the litigation only if a court concludes that later consideration would not unfairly surprise the opposing party.

The longer answer, developed below, offers three points. First, if the government had raised the limitations period as a defense in either Valley Park Ranch or 3M, the Tax Court should have time-barred the claim.

Second, Corner Post, the Supreme Court case decided July 1, allows the government to continue to argue that the six years begin to accrue when a regulation is promulgated (or other guidance is issued) for procedural claims (as opposed to substantive ultra vires claims).

Third, the government needs a thoughtful time-bar litigation policy for tax cases. It should pursue the time-bar defense regularly. But it also should consider waiving it in appropriate cases, such as when the administrative procedure claim arises from a tax return filed within six years of a promulgated reg.

II. Time-Barring Tax Cases

A. Antitax Exceptionalism

When the Supreme Court wrote in 2011 in Mayo that it was “not inclined to carve out an approach to administrative review good for tax law only,”¹³ it set in motion the big and challenging project of incorporating administrative law into tax law.¹⁴ This project is a moving target.

As court decisions reshape administrative law and, in general, curtail the power of the administrative state, tax will not only adapt but also contribute to the developing law. For instance, when the Supreme Court decided Loper Bright¹⁵ in June, it overruled Chevron deference to regulations in tax as in other areas. And when the Court decided Corner Post just a few days later, its decision about accrual timing for the six-year limitations period in 28 U.S.C. section 2401(a) made the time bar largely irrelevant for substantive ultra vires claims. Yet Corner Post also opened the way for tax cases to build some administrative law precedent on earlier accrual for procedural claims.

As discussed more fully later, Corner Post squarely holds that substantive ultra vires claims accrue later, when a specific plaintiff acquires the right to sue. But footnote 8 of the opinion leaves open the possibility that claims that allege procedural error, like notice and comment failures, accrue earlier, when a regulation is promulgated. These procedural claims are exactly the kind of claims that are typically raised in tax cases. The government can still argue that procedural claims are time-barred in tax cases based on accrual of the six-year limitations period for all eligible plaintiffs when an agency promulgates a regulation or releases other guidance.

The administrative law/tax law incorporation project for this limitations period is challenging not only because of Corner Post, but also because of some special characteristics of tax law. For example, the Anti-Injunction Act usually delays taxpayers’ ability to raise administrative procedure claims.¹⁶ This complicates the six-year time-bar analysis.

But before getting any further into these complexities, let’s review the existing law on when the six-year time bar of 28 U.S.C. section 2401(a) accrues. The case law consensus is that time bars generally accrue at promulgation for procedural lineage claims¹⁷ like those raised in Valley Park Ranch and 3M. Those claims relate, for instance, to the adequacy of notice and comment procedures.¹⁸

Some nontax cases parallel Valley Park Ranch (involving a 1986 conservation easement regulation) and 3M (involving a 1994 transfer pricing regulation). These involve plaintiffs subject to agency enforcement action who try to object that the agency invalidly (and long ago) issued the regulation or guidance that supports the enforcement action. Cases involve procedural challenges on facts including a Medicaid beneficiary who became subject to a 1980 regulation regarding offset of Social Security benefits in 2006,¹⁹ a hospital that did not face Health and Human Services enforcement of a 1986 manual regarding coverage of certain devices until 1994,²⁰ and a political organizer who found that a 1973 election law regulation blocked his 2004 visit to a Veterans Affairs hospital.²¹

Each of these claims challenged the procedural lineage of a regulation or other guidance. All were time-barred. These decisions and others make up the case law consensus holding that the six-year time bar accrues at promulgation for claims involving the procedural lineage of regulations, such as challenges that notice and comment requirements were not met.

B. Raise It or Waive It

The six-year time bar of 28 U.S.C. section 2401(a) is not jurisdictional. As a result, for a government defendant, the first step in an effort to time-bar a claim under this section is to raise it as an affirmative defense. If 28 U.S.C. section 2401(a) were jurisdictional, a court would be required to raise it sua sponte, and (accordingly) the government would not be deemed to waive the time bar if it failed to raise it.²² A jurisdictional limitations period is also not subject to equitable tolling or other equitable exceptions.²³

Although 28 U.S.C. section 2401(a) used to be considered jurisdictional,²⁴ the Supreme Court’s jurisprudence on limitations periods and jurisdiction has shifted over the past several decades. In a 1990 case, the Court held that a limitations period is jurisdictional only if the statutory language clearly so states.²⁵ In 2015 the Court developed the rule that a statute must contain a “clear statement of jurisdiction” and held that a limitations period codified in an adjacent statute, 28 U.S.C. section 2401(b), is not jurisdictional.²⁶ Decisions in 2022 and 2023 further confirm this clear-statement rule.²⁷

The language of 28 U.S.C. section 2401(a) — that “every civil action commenced against the United States shall be barred unless the complaint is filed within six years after the right of action first accrues” — lacks a clear statement of jurisdiction and so should not be treated as a jurisdictional limit. Several courts of appeals have so held.²⁸ The Fifth Circuit had been an outlier in considering 28 U.S.C. section 2401(a) jurisdictional in at least some cases, but it appears to be coming around to the majority view.²⁹

Because 28 U.S.C. section 2401(a) is not jurisdictional, it is subject to the usual rule for nonjurisdictional affirmative defenses, which is that the defendant must raise the defense.³⁰ The applicable rule of civil procedure requires the defendant to raise a statute of limitations defense in the answer, meaning the first filing submitted to a court in response to a plaintiff’s complaint.³¹ The Tax Court rule follows the same approach.³² In general, courts allow a defendant to raise a limitations period as an affirmative defense later in the litigation only if it does not surprise the plaintiff (that is, the taxpayer).³³ The six-year time bar of 28 U.S.C. section 2401(a) did not block the taxpayer’s administrative procedure challenge in Valley Park Ranch or 3M for the simple reason that the government had not raised it as a defense.³⁴

C. Early Accrual: Policy

When a defendant does properly raise the six-year time bar as a defense, courts have justified the result of accruing the limitations period at promulgation (rather than later, such as when a plaintiff acquires the ability to sue) by emphasizing the nature of administrative procedure as a public right. That is, the right to challenge the procedural lineage of a regulation proceeds from the general public’s interest in adequate administrative procedure. As the Sixth Circuit explained in 2015, a claim about defective notice and comment would be a claim about the “denial of [administrative] process to the public at large,” and a classic example of accrual of an Administrative Procedure Act claim when “an agency . . . issues a rule.”³⁵ As the Ninth Circuit similarly explained in 1990 when it time-barred a challenge to a 1964 Bureau of Land Management order, any administrative procedure injury “was that incurred by all persons when, in 1964 . . . the amount of land available for mining claims was decreased.”³⁶

The policy values of certainty and stability in law also support accruing the limitations period at promulgation. If the limitations period accrued anew for procedural claims whenever a new plaintiff was injured by a regulation, there would be no practical limit on the ability to challenge the procedural validity of decades- or centuries-old regulations, because a new plaintiff (including a new taxpayer) could always arise later and become newly subject to the regulation. The later-accrual approach “would virtually nullify the statute of limitations.”³⁷ With the Corner Post decision, the Supreme Court has as a practical matter nullified the statute of limitations for substantive ultra vires claims. But, as discussed further below, it has not done so for procedural claims.

After Corner Post, the time bar accrues later for claims that involve a substantive ultra vires claim. In tax, these claims are almost always “as applied,” meaning that they arise from an enforcement action. Tax claims are almost always as-applied because the AIA generally blocks facial pre-enforcement challenges, subject to a limited case-law-based exception.³⁸ The typical substantive ultra vires claim in tax arises after the government assesses a tax deficiency or fails to grant a refund claim based on the content of a regulation or administrative guidance. In the resulting litigation, the taxpayer can raise claims that the regulation (or guidance) relied on by the government exceeds the statutory authority of the Internal Revenue Code, or that a regulation incorrectly interprets a statutory term.

It turns out that the case law even before Corner Post held that as-applied ultra vires claims accrued later, and not earlier at promulgation.³⁹ Because tax cases are almost always as-applied, the accrual of an ultra vires claim generally happens later anyway in tax cases, since the claim proceeds from an enforcement or collection action. As a result, Corner Post does not significantly increase the vulnerability of tax regulations and other guidance to ultra vires challenge. Moreover, even after Corner Post, the government still can offer the six-year time bar as a defense to a procedural lineage claim — even in an as-applied case.

III. Corner Post

A. Corner Post’s Holding

In Corner Post, the Court held 6-3 that for purposes of the six-year limitations period of 28 U.S.C. section 2401(a), a claim brought under the APA accrues “when the plaintiff has the right to assert it in court.”⁴⁰ The Court’s analysis emphasized the historical and dictionary meanings of “first accrues.”⁴¹ It focused on contemporary sources at the time of a 1948 recodification, which expanded 28 U.S.C. section 2401(a) and made it into the main catchall or default limitations period for suits against the federal government.⁴²

In dissent, Justice Ketanji Brown Jackson argued that APA claims are not plaintiff-specific, so that the meaning of “accrues” grounded in plaintiff-specific contexts, like contract, should not apply.⁴³ The Court responded that the grammar of the statute connected the complaint with the cause of action, which, the Court reasoned, must mean the specific plaintiff’s cause of action.⁴⁴ In response to the dissent’s policy concerns about exposing regulations to challenge forever,⁴⁵ the Court responded that if Congress wants to change the limitations period statute, it can do so.⁴⁶ The Court compared 28 U.S.C. section 2401(a) with statutes of repose⁴⁷ like the Hobbs Act, which runs 60 days from the entry of an agency order.⁴⁸

APA claims covered by Corner Post as a practical matter have no time limit. Even if one plaintiff faces a time bar that accrues early, at promulgation, another plaintiff who comes into existence later and is later harmed by the regulation can challenge it based on later accrual. In Corner Post itself, a later-formed plaintiff revived the lawsuit and saved it from the time bar. First, two trade associations challenged Reg II, the Federal Reserve’s 2011 maximum debit card swipe-fee regulation.⁴⁹ The trade associations lost when the D.C. Circuit upheld the regulation.⁵⁰ Then the plaintiffs added Corner Post, a truck stop that began doing business in 2018, to the suit in “an end run around” the six-year time bar, so they could try again in the Eighth Circuit.⁵¹

The Corner Post complaint contained two claims. One — clearly a substantive ultra vires claim — alleged that the swipe fee regulation violated the Durbin Amendment,⁵² the authorizing substantive statute under which the Federal Reserve promulgated the reg. The other — perhaps a procedural claim — alleged that the Fed had acted arbitrarily and capriciously when it promulgated the reg. The Court makes clear that its holding applies to substantive claims. But it leaves open whether the holding applies to procedural claims.

The Corner Post Court explained that a substantive claim means a claim that the regulation violated the authorizing statute. This kind of claim used to be called a Chevron claim, but because Chevron has now been overruled by Loper Bright, that label doesn’t work anymore. We can call it an ultra vires claim instead — a claim that a regulation (or guidance) exceeds the authority of the authorizing statute — the IRC, almost always, for a tax reg.

An example of an ultra vires challenge to tax regulations is the challenge to the payroll tax regulation defining the term “student” to exclude medical residents, which was upheld by the Court in Mayo in 2011. The Mayo Foundation’s argument, which failed, was that Treasury’s regulation was inconsistent with the statute, section 3121(b)(10). Corner Post holds that the limitations period for ultra vires challenges like that in Mayo accrues “when the plaintiff has the right to assert it in court.”⁵³ For a refund claim, like that in Mayo, that right would arise six months after the taxpayer filed its refund claim, assuming the government did not reply within that six-month period.⁵⁴

The reg at issue in Mayo was promulgated by Treasury in 2004, and the Mayo Foundation promptly challenged it. But under the Corner Post holding, the regulation could have been challenged even if it was an old regulation promulgated in, say, 1984. Regardless of whether the Mayo Foundation could sue,⁵⁵ more recently created teaching hospitals where medical residents study and work clearly could have brought later ultra vires challenges to an old regulation.⁵⁶ There is no practical 28 U.S.C. section 2401(a) time limit to an ultra vires claim after Corner Post. This is illustrated in the bottom row of the table.

When Does 28 U.S.C. Section 2401(a) Accrue for Challenges to Regulations?

	Facial Challenge	As-Applied Challenge
Procedural challenge	EARLY: When the regulation is promulgated. Arguably, even after Corner Post.	EARLY: When the regulation is promulgated. Arguably, even after Corner Post. See, e.g., Townley, Govig.
Substantive ultra vires challenge	LATER: When the specific plaintiff has the right to assert it in court. Corner Post.	LATER: When the specific plaintiff has the right to assert it in court. Wind River; see, e.g., Townley, Govig.

For as-applied claims, the Corner Post holding that ultra vires claims accrue later does not materially change the law. An as-applied claim arises out of an agency’s enforcement action. The case law has long concluded, in a doctrine named for a case called Wind River,⁵⁷ that ultra vires challenges accrue when the plaintiff acquires the right to sue in as-applied cases. Because of law including the AIA, facial challenges to tax regulations are rare.⁵⁸ Most administrative procedure challenges in tax are as-applied claims. Mayo, for instance, arose out of a refund claim and was an as-applied claim.

Outside tax, facial claims — that is, pre-enforcement claims — are common. Corner Post involved facial claims. The Fed did not directly enforce its maximum swipe fee regulation against the plaintiff convenience store, because the reg applied instead to the banks to which the plaintiff paid the swipe fees. The Corner Post plaintiffs challenged the swipe fee regulation on a facial — not as-applied — basis.

But in tax, the only clear holding of Corner Post has a limited effect: When a facial ultra vires claim is allowed despite the AIA (which is pretty unusual), the six-year time bar accrues not earlier, on promulgation, but rather later, when the plaintiff has the right to assert that claim in court.

B. Footnote 8

The Corner Post result — later, plaintiff-focused accrual — is clear for ultra vires claims. But this later-accrual result is not clear for procedural claims — those identified in the top row of the chart above. In footnote 8, the Corner Post Court indicates that earlier, at-promulgation accrual could still apply for procedural claims:

It also may be that some injuries can only be suffered by entities that existed at the time of the challenged action. Corner Post suggests that only parties that existed during the rulemaking process can claim to have been injured by a “procedural” shortcoming, like a deficient notice of proposed rulemaking. Reply Brief 18-19. We need not resolve that issue here because there is no dispute that Corner Post proffered an injury that does not depend on its having existed when the Board promulgated Regulation II: the rule’s alleged conflict with the Durbin Amendment. The dissent’s observation that “the claims in this case are procedural,” post, at 18, is confused. Even if some of Corner Post’s claims might be procedural, its central claim — that the regulation violates the statute — is a prototypical substantive challenge.⁵⁹

The Corner Post complaint included two claims. One was that the regulation exceeded the authority of the statute. The other claim was that the regulation was promulgated in an arbitrary and capricious fashion. The Court in footnote 8 distinguishes procedural claims — perhaps including the arbitrary and capricious claim in the case — and marks them for possible early accrual.

This suggestion channels a unanimous case law consensus about early accrual for procedural claims.⁶⁰ For example, in Herr,⁶¹ the Sixth Circuit case that the Corner Post plaintiffs emphasized in their briefing, Judge Jeffrey Sutton distinguished between procedural lineage claims and ultra vires claims, writing that a classic example of accrual of an APA claim at the time of promulgation is when an agency “issues a rule without following all requirements of notice-and-comment rulemaking.”⁶² Similarly, in its reply brief at the Court, Corner Post conceded that “procedural attacks mentioned in the government’s cases [such as notice-and-comment violations] will likely still be barred six years after a rule becomes final.”⁶³

The Court appears to ground this opening for earlier accrual for procedural claims in standing and its requirement of injury.⁶⁴ When the Court observes that it “may be that some injuries can only be suffered by entities that existed at the time of the challenged action,” it refers to the challenged action of faulty administrative procedure, or of bad process followed during promulgation. Certainly the ability to participate in notice and comment is available only to those who exist when notice and comment is happening. The Court suggests that the persons who exist at promulgation not only exclusively hold the right to participate but also exclusively hold standing to object to an inadequate participation opportunity.

This new idea⁶⁵ holds promise as a government litigation tactic, including in the tax cases involving claims about notice and comment flaws. The history of tax rulemaking includes a decades-long period when Treasury and the IRS were not fully diligent about following notice and comment procedures; old guidance and old regs are vulnerable to challenge on these grounds.⁶⁶ Cases like Valley Park Ranch, 3M, Townley, and Govig turn on whether notice and comment should have applied or on whether notice and comment was adequate.

Corner Post’s footnote 8 increases the importance of these cases about old tax regs. The standard-fare claims about notice and comment in tax are plainly procedural claims,⁶⁷ and the opening offered by footnote 8 invites the government to continue to raise the six-year time bar as a challenge to old tax regulations. The results might inform administrative law generally, as well as tax administrative law in particular.

C. District Court Tax Decisions

The district court decisions that have applied the six-year time bar in tax cases provide a nice illustration of the application of a rule that requires accrual at promulgation for procedural claims but not substantive claims. Townley, for instance, involved claims arising from the IRS’s disallowance of a conservation easement deduction. The court correctly time-barred the taxpayers’ as-applied procedural lineage claim that notice and comment had been violated when the conservation easement regulations were promulgated in 1986.⁶⁸ But the Townley court in 2023 recognized the exception for as-applied, ultra vires claims and allowed the taxpayers to pursue their argument that the regulation was inconsistent with the authorizing statute.⁶⁹ Likewise, the Govig court time-barred procedural challenges to Notice 2007-83, concerning tax shelter employee welfare benefit arrangements established more than eight years after the issuance of the notice.⁷⁰ But the Govig court declined to time-bar a claim that the IRS notice exceeded the authority of the relevant statute.⁷¹

Both Townley and Govig are consistent with the existing case law on 28 U.S.C. section 2401(a), which is summarized in the table. Townley and Govig involved as-applied challenges both to the procedural lineage of a regulation (or notice) and to the question of whether the regulation (or notice) exceeded the authority of the statute. They involved, in other words, the right, as-applied column of the table, including both the procedural row and the substantive row. As described, consistent with available precedent, the six-year time bar accrued at the time of promulgation for procedural lineage claims. But the time bar accrued later — when a plaintiff acquired the ability to sue — for ultra vires claims in both Townley and Govig.

IV. Waiving the Six-Year Time Bar

A. Anti-Injunction Act Complications

Outside tax, facial administrative procedure claims generally are available,⁷² so that when the limitations period accrues at promulgation, it is simultaneously true that, at least probably, a plaintiff can bring an administrative procedure complaint and litigate the case. In contrast, within tax, the AIA⁷³ frames the question of when the government should waive the six-year time bar. The AIA (as well as other statutes such as the Declaratory Judgment Act)⁷⁴ generally prevents taxpayers from litigating a tax claim against the government before assessment or collection. In other words, in tax, facial claims are generally not allowed. Instead, most tax cases must be brought on an as-applied basis.

The restriction to as-applied claims in tax is subject to an exception as described in CIC Services, a 2021 Supreme Court case.⁷⁵ In CIC Services, the Court allowed a facial challenge to a tax shelter notice on the theory that the notice imposed an affirmative reporting obligation connected to possible criminal penalties but with only an attenuated connection to a possible civil tax liability. Although the case law is still working out the scope of CIC Services, an administrative procedure claim that can be raised on a facial basis in tax remains an exception. The overwhelming majority of tax cases are as-applied deficiency cases that follow from government enforcement.

B. Tax Procedure Delays

When only as-applied, and not facial, claims are available, as is usually the case in tax, delays that result from tax procedure rules can interfere with taxpayers’ ability to bring procedural claims. This problem of delay is especially acute for deficiency actions, in which the government charges a taxpayer with underpayment of tax after auditing the taxpayer’s return. In these cases, delay arises because of the lag between promulgation and tax return filing, because of the typical three-year limitations period for the government to challenge a tax return, and because of the practice of extending that limitations period.

For example, say a regulation is promulgated in year 0. A taxpayer would likely first have the opportunity to file a tax return with a position that challenged the regulation in year 1. The tax return filing starts the three-year limitations period running, so that the government can wait until year 4 to assess a deficiency related to the taxpayer’s position.⁷⁶ Further, it is customary for taxpayers and the government to agree to extend the limitations period to allow additional time for IRS examination and for the internal IRS appeals process to run its course.⁷⁷ It is only after this internal tax controversy practice is complete that the IRS issues a notice of deficiency. After that, a taxpayer acquires the right to sue and has 90 days to file a petition for review in the Tax Court.⁷⁸

Even if the government promptly challenges a taxpayer’s position after a regulation is promulgated, there is an excellent chance that more than six years will elapse before the taxpayer has the ability to present the controversy to the Tax Court. Moreover, there is also the possibility that the government will not challenge the taxpayer’s position at all. The government audits only a tiny percentage of tax returns — even for the highest-income taxpayers.

Yet there is an answer to delay and underenforcement that can get an administrative procedure challenge to court. This answer is classic: the taxpayer-initiated refund suit. The taxpayer’s strategy would be to first file a tax return that complies with a regulation, then file an amended return that challenges the regulation, then sue the government for a refund.⁷⁹ In a refund suit, the taxpayer largely controls the timing of the litigation. This time-worn strategy⁸⁰ can also force review of procedural lineage claims within the six-year limitations period.

C. Allowing Procedural Claims in Tax

The logic of accruing the six-year limitations period at promulgation in tax proceeds from the general administrative law analysis explained above, including the opening left by footnote 8 in Corner Post. As Mayo explains, there is no special administrative law for tax only. Applying the six-year time bar is part of the big project of bringing administrative law into tax.⁸¹

Nevertheless, there is a special policy challenge in tax because of the AIA and other laws that often delay taxpayers’ ability to bring claims. Facial claims are allowed only in the small proportion of cases described by the CIC Services precedent.⁸² Meanwhile, except for refund claims, as-applied claims arise at the discretion of the government and are often subject to delay outside the taxpayer’s control.

This tension suggests that the law should seek ways to ensure that procedural lineage challenges are available for tax regulations. But this goal does not require changing the timing of accrual for tax. The flexibility in the law arises from three other sources instead.

The first source of flexibility is taxpayers’ ability to bring refund suits, as discussed above.⁸³ A diligent taxpayer can get its administrative procedure claim to court within the six-year time bar through the mechanism of a refund suit. It may be that this approach highlights the taxpayer’s return for the government and increases the chance of audit.⁸⁴ But similar concerns likely apply for nontaxpayer plaintiffs that facially challenge regulations issued by other agencies. The refund suit is, in general, an effective workaround.

The second source of flexibility arises from courts’ ability to equitably toll the 28 U.S.C. section 2401(a) six-year time bar. The Supreme Court has said that equitable tolling can apply against the government if the claimant has exercised due diligence in preserving his legal rights but “has been induced or tricked by his adversary’s misconduct into allowing the filing deadline to pass.”⁸⁵

Consider two hypotheticals to illustrate when equitable tolling of the six-year time bar would make sense for a tax claim. In the first, assume that the government promulgates regulations with an effective date seven years after promulgation. This would make an administrative procedure challenge impossible, even via a refund suit. In the second situation, assume that a taxpayer diligently pursues a refund claim but must wait six months for the government to respond to the claim before going to court.

Equitable tolling could be an appropriate remedy in both of these cases. Whether or not the government’s action should be described as misconduct, the effect is to produce a delay in the taxpayer’s ability to raise the claim regardless of how diligently the taxpayer pursues it. Equitable tolling has applied when a claimant’s ability to pursue a claim is suspended for reasons beyond the claimant’s control.⁸⁶

The third source of flexibility that can ensure access to procedural lineage challenges to tax regulations is government waiver policy. This is discussed in more detail in the next section.

D. Government Waiver Policy

Because 28 U.S.C. section 2401(a) is not jurisdictional, the government can decide when to waive the limitations period defense. Before 2023, as far as I know, it did not raise, and thus waived, the defense in all cases. This choice opened old tax regulations to procedural lineage challenges regardless of how long they had been on the books. In at least one case, Altera, the government affirmatively confirmed its decision to waive the defense.⁸⁷

Going forward, the government’s waiver policy will help shape the exposure of old tax regs to challenge. As a matter of internal process, the government might choose to raise the limitations period defense every time a taxpayer raises an administrative procedure claim to provide time for the government to consider whether waiver is appropriate. But if the government pressed the six-year time bar as a defense to every procedural lineage claim, some claims might be time-barred simply because of delays that result from working through the administrative tax controversy process at the IRS, rather than because taxpayers are reaching back in time to challenge decades-old procedural foot faults. To allow some relatively recent administrative procedure challenges to move forward, the government could pursue one or both of the following two strategies.

First, the government could revise its standard agreement with taxpayers to extend statutes of limitation to allow their cases to work their way through the internal IRS appeals process. This extension now tolls various limitations periods, most prominently the typical three-year limitations period following the filing of a tax return, but the extension does not toll the six-year time bar of 28 U.S.C. section 2401(a).⁸⁸ That six-year time bar should be added to the list of limitations period that the parties agree to extend in that agreement.

More generally, the purpose of the six-year limitations period — to encourage a plaintiff, or taxpayer, to timely raise a claim — might be well enough served if an as-applied procedural claim arises from a tax return filed (rather than a court complaint filed) within six years of the effective date of a regulation and by a taxpayer that existed when the regulation was promulgated. This would help account for the reduced availability of facial claims in tax and provide reasonable opportunity for taxpayers to raise administrative procedure claims. Government waiver policy, in addition to judicial decisions, can help to balance the importance of adequate administrative procedure and the value of certainty in the law.

V. Conclusion

How late is too late to challenge old tax regs? Corner Post, a recent Supreme Court case, adopts a plaintiff-specific approach for ultra vires substantive challenges. But for procedural challenges, it invites the government to argue that the applicable six-year limitations period of 28 U.S.C. section 2401(a) accrues when a regulation is promulgated. This limitations period would have barred recent challenges to old regulations in cases like Valley Park Ranch and 3M — if the government had raised it. Going forward, the government should regularly raise the six-year time bar as an affirmative defense. It should be prepared for the possibility of equitable tolling counterarguments. It should also waive the time bar in some cases to allow reasonable opportunity for procedural challenges, for instance if a claim concerns a tax return filed before the six-year mark and by a taxpayer in existence when the regulation was promulgated.