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IRS and Taxpayer Argue Over Disaster Extension Provision’s Reach

Posted on Feb. 23, 2021

A taxpayer is arguing that Congress’s recently added 60-day disaster deadline extension should apply to her March Tax Court petition, but the IRS says that only its extension that began in April is applicable.

The Tax Court will be called upon in Lowe v. Commissioner to decide what section 7508A(d) does for petition filing deadlines during the COVID-19 pandemic after the petitioner invoked the provision in her defense against the IRS’s motion to dismiss.

Section 7508A(d), which calls for a mandatory 60-day disaster deadline extension, was added to the tax code in late 2019. A few months later, as the pandemic grew, the provision received some attention because of the extensive declarations covering the whole country.

Airreyon S. Lowe received a statutory notice of deficiency in November 2019 that disallowed part of an earned income tax credit related to her hair-braiding business. The notice stated that her petition should be filed by March 2, 2020 — under section 6213(a), the date listed on a notice of deficiency operates as the filing deadline if it is more than 90 days after the mailing date.

Lowe mailed her petition on March 3, 2020, and the Tax Court received it on March 9, 2020. On June 16, 2020, the IRS moved to dismiss her case. After obtaining counsel, Lowe raised the mandatory disaster deadline extension in her objection supplement, filed November 19, 2020, and the IRS responded on January 29.

Because her petition was due and filed both before the Tax Court closed its building on March 19, 2020, and before the April 1, 2020, effective date of the IRS’s section 7508A(a) relief in Notice 2020-23, 2020-18 IRB 742, Lowe needs some other relief to save her from the missed filing deadline.

According to Lowe, the section 7508A(d) mandatory 60-day deadline extension should begin on January 20, 2020 — the date specified in then-President Trump’s disaster declarations. That would have given her until March 21, 2020, thus making her petition timely.

Lowe noted that when she filed her supplemental objection, the IRS and Treasury hadn’t issued any regulations under section 7508A(d). Those regulations (REG-115057-20) weren’t proposed until January 11, and the comment period remains open until March 15.

Because section 7508A(d) is mandatory, unlike section 7508A(a), and has no procedural mechanism, it must be triggered by the disaster declaration rather than an IRS decision, Lowe argued. The language stating that subsection (d) causes deadline extensions “in the same manner” as subsection (a) means that anything that could have been extended under subsection (a) is automatically extended under subsection (d), she asserted.

Section 7508A(d) was intended to provide a floor, and therefore certainty, on deadline extensions for taxpayers affected by disasters, according to Lowe.

The IRS seems to agree that section 7508A(d) is meant to function as a minimum extension period but asserted that the invocation of subsection (a) means that the mandatory minimum doesn’t apply independently of the IRS’s discretionary choices. In other words, subsection (d) only says that whatever the IRS chooses to do under subsection (a) must last for at least 60 days, according to the IRS.

Disagreeing with Lowe’s reading of section 7508A, the IRS argued that “there is no logical reason to assume” that time-sensitive acts under section 7508A(d) include all the potential time-sensitive acts under section 7508A(a) and 7508(a)(1). Because it also follows that the failure to name acts subject to relief can’t mean no relief, Congress must have meant for section 7508A(d) relief to attach to the IRS’s section 7508A(a) decisions, the IRS asserted.

“No mandatory postponement period under section 7508A(d) applies in this case because the President’s March 13, 2020 declaration, pursuant to which the Secretary granted relief, did not specify an incident date as required by section 7508A(d),” the IRS said.

The IRS’s response brief didn’t refer to the proposed section 7508A(d) regs, but many of the positions in both documents are similar. Although Lowe filed her brief before the proposed regs were released, she hasn’t asked to further supplement her argument in response to the IRS’s brief.

The petitioner in Lowe v. Commissioner, No. 4629-20S (Tax Ct. 2021), is represented by Christine S. Speidel of the Villanova Federal Tax Clinic.

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