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Professors Scrutinize, Recommend Changes to Disaster Relief Regs

MAR. 15, 2021

Professors Scrutinize, Recommend Changes to Disaster Relief Regs

DATED MAR. 15, 2021
DOCUMENT ATTRIBUTES

Comments on the Proposed Regulations under Section 7508A

The following comments are submitted on March 15 by Bryan Camp, George H. Mahon Professor of Law, Texas Tech University School of Law, and by T. Keith Fogg, Clinical Professor of Law, Harvard University School of Law. For questions, please contact Bryan Camp at bryan.camp@ttu.edu, and 806-834-8606.


Table of Contents

I. BACKGROUND

A. Section 7508

B. Section 7508A(a)

C. The Stafford Act

D. Section 7508A(d)

E. The Proposed Regulations

II. COMMENTS AND RECOMMENDATIONS

A. Relationship of Subsection (d) to Subsection (a)

B. Definition of “Federally Declared Disaster”

C. Which Stafford Act Declarations Count?

1. The Pick-And-Choose Problem

2. The Amendment Problem

D. Interpreting a Challenging Statute


I. BACKGROUND

To understand these comments, we think it helpful to understand the interplay of section 7508A with both section 7508 and the Stafford Act.1

A. Section 7508

Section 7508(a)(1) requires the postponement of various acts by taxpayers and by the Service while taxpayers are serving in a designated combat zone, or while engaged in certain military operations, or while hospitalized from injuries received during such service. The period of postponement is the period of service or engagement, plus any period of continuous hospitalization, plus 180 days. Section 7508 does not permit the Secretary any discretion, either as to modifying the period of postponement or as to determining the acts to be postponed. All the acts listed must be extended by the mandatory period.

B. Section 7508A(a)

In sharp contrast to the mandatory nature of section 7508(a), section 7508A(a) grants the Secretary broad discretion to grant relief to taxpayers “determined by the Secretary to be affected by a federally declared disaster (as defined by section 165(i)(5)(A)). . . .” The statute provides “the Secretary may specify a period of up to 1 year that may be disregarded in determining . . . whether any of the acts described in paragraph (1) of section 7508(a) were performed within the time prescribed. . . .” As a practical matter, the discretionary function delegated by Congress to the Secretary is exercised by the Service.2

Section 7508A(a) creates two categories of discretion. First, the Service has discretion as to the length of any postponement period.3 Second, the Service has discretion to decide which of the acts cross-referenced in section 7508(a)(1) are to be postponed.4 That is, nothing in section 7508A(a) requires the Service to create any period of postponement for any taxpayer affected by a federally declared disaster, and nothing in section 7508A(a) requires a minimum such period. It only puts an outer limit of one year on any grant of postponement.

The discretion given in section 7508A(a) is triggered only by “a federally declared disaster (as defined by section 165(i)(5)(A)).” Section 165(i)(5)(A), in turn, defines the term “federally declared disaster” as “any disaster subsequently determined by the President of the United States to warrant assistance by the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.”

C. The Stafford Act

The Stafford Act authorizes the President to issue two types of declarations: disaster declarations and emergency declarations.5

Section 401 of the Stafford Act6 authorizes the President to declare a “major disaster” when so requested by a state or tribal government. The term “major disaster” is a defined term. Notably, “major disaster” declarations are issued only subsequent to a disaster and only after receiving a request for such a declaration from local authorities.7 These declarations are commonly referred to as “disaster declarations.”8

Section 501 of the Stafford Act9 authorizes the President to make an entirely different kind of declaration — a declaration of an emergency. Emergency declarations are different from disaster declarations and are governed by a different set of rules. One distinction is that emergency declarations may be issued without the request of a state or tribal government. Specifically, they may also be issued by the President, sua sponte, in situations involving “a subject area for which, under the Constitution or laws of the United States, the United States exercises exclusive or preeminent responsibility and authority.”10

Another important distinction between disaster and emergency declarations is the scope of relief. An emergency declaration is more limited in scope. It does not have the long-term federal recovery programs of a major disaster declaration and does not authorize relief to individuals. Generally, federal assistance and funding pursuant to an emergency declaration are provided only to governmental entities, and only to meet a specific emergency need or to help prevent a major disaster from occurring.

Perhaps the most important distinction between disaster declarations and emergency declarations is timing. Major disaster declarations are issued in reaction to a disaster. Emergency declarations, in contrast, may be issued even before a disaster strikes, to “lessen or avert the threat of a catastrophe, including precautionary evacuations.”11 In fact, section 502(c) of the Stafford Act expressly provides:

The President shall promulgate and maintain guidelines to assist Governors in requesting the declaration of an emergency in advance of a natural or man-made disaster (including for the purpose of seeking assistance with special needs and other evacuation efforts) under this section by defining the types of assistance available to affected States and the circumstances under which such requests are likely to be approved.12

The CRS Report summarizes these differences this way:

Emergency declarations are made to protect property and public health and safety and to lessen or avert the threat of a major disaster or catastrophe. Emergency declarations are often made when a threat is recognized (such as the emergency declarations for Hurricane Katrina which were made prior to landfall) and are intended to supplement and coordinate local and state efforts prior to the event such as evacuations and protection of public assets. In contrast, a major disaster declaration is made as a result of a disaster or catastrophic event and constitutes a broader authority that helps states and local communities, as well as families and individuals, recover from the damage caused by the event.13

D. Section 7508A(d)

In 2019, Congress added section 7508A(d), titled “Mandatory 60-day Extension,” as part of the 2019 Disaster Tax Relief Act.14 Subsection (d)(1) creates a mandatory period that is to be “disregarded in the same manner as a period specified under subsection (a).” The mandatory period starts on “the earliest incident date specified in the declaration” and ends on “the date which is 60 days after the latest incident date so specified.” Subsection (d)(5) provides that this mandatory extension period is “in addition to (or concurrent with, as the case may be) any period specified under subsection (a) or (b) with respect to such person.”

The House Ways and Means Report on the 2019 Disaster Tax Relief Act (House Report)15 explains, in the “Reasons for Change” section, that the reason for section 7508A(d) was to create “certainty and additional time” by “an automatic extension of filing deadlines for taxpayers affected by Federally declared disasters” in order to “ease the burden of tax compliance for taxpayers dealing with the hardship of disaster recovery.”16

The House Report's “Explanation of Provision” appears to reflect a belief that section 7508A(d) creates a mandatory postponement period for all the acts listed in section 7508(a)(1):

The provision provides to qualified taxpayers in the case of a Federally declared disaster a mandatory 60-day period that is disregarded in determining whether the acts [described in section 7508(a)(1)] were performed in the time prescribed. . . .17

The desire of the Congress to create certainty has been (1) undermined by the contradictions in the House Report, (2) undermined by the plain text of subsection (d), and (3) overtaken by the events of the COVID-19 pandemic.

First, the House Report itself seems confused on the issue. The “Explanation of Provisions” statement is at odds with the Report's earlier statement that the purpose of section 7508A(d) was to create a mandatory postponement period for taxpayer filing deadlines. Taxpayer filing deadlines are but a subset of the acts listed in section 7508(a)(1).

Second, the text of subsection (d)(1) does not specify what deadlines for what acts receive the mandatory postponement period. There is no textual path to the conclusion that subsection (d) creates a mandatory postponement period for all the acts listed in section 7508(a)(1) and cross-referenced in section 7508A(a). That is because subsection (d)(1) does not specify the acts upon which the mandatory period operates. Instead, it says only that its mandatory postponement period is to be “disregarded in the same manner as a period specified under subsection (a).” But there are no periods under subsection (a) to be disregarded unless and until the Service exercises discretion to create them. Therefore, the text in subsection (d) has nothing on which to operate unless and until the Service exercises the powers granted by subsection (a).

As a result, while subsection (d) operates to cabin the Service's discretion as to the length of a postponement period, its language is not easily interpreted as creating a mandatory period for all acts listed in section 7508(a)(1). To accomplish that would require text that directly references the acts listed in section 7508(a)(1) rather than indirectly references them through section 7508A(a).

Third, the uncertain operation of subsection (d) has been made manifest by the COVID-19 pandemic. The subsection assumes that all relevant disaster declarations will contain both earliest and latest incident dates and are all simply one-off documents. Subsection (d)(1) thus does not address how to calculate the mandatory period in the absence of either or both an earliest incident date or latest incident date. Nor does subsection (d)(1) address how amendments to disaster declarations affect the calculation of the mandatory period.

E. The Proposed Regulations

The Proposed Regulations attempt to bring certainty and uniformity to the operation of subsection (d) by offering the following bright line rules:

First, that the term “federally declared disaster” in 7508A(a) means all types of declarations authorized by the Stafford Act: both a section 401 major disaster declaration and a section 501 declaration of national emergency.18 Thus, under the Proposed Regulations, either type of declaration triggers the authority given in section 7508A(a).

Second, if the Service does not exercise its discretion under subsection (a), then there is no mandatory suspension period under subsection (d).19

Third, if the Service does exercise its discretion under subsection (a), the mandatory suspension period in subsection (d) applies only to the time periods for those acts suspended by the Service under subsection (a) and does not apply to any acts for which the Service has not exercised its discretion under subsection (a).20

Fourth, the following rules will be used for calculating the mandatory suspension period when it applies:

(1) where there is both an earliest and latest incident date in the relevant declaration, the applicable period of postponement is the greater of (i) the period specified by the Service or (ii) the mandatory period as calculated per the statute;

(2) where there is an earliest incident date but no latest incident date in the relevant declaration, the applicable period of postponement is one year; and

(3) where there is neither an earliest nor latest incident date in the relevant declaration, the applicable period of postponement is the period specified by the Service.21

The Preamble uses the COVID-19 pandemic to give examples of some of these rules, as follows:

First, the Preamble says that the relevant Stafford Act declaration was the President's March 13, 2020, letter to members of his Cabinet.22 Because the March 13 letter contained no earliest incident date, section 7508A(d) did not come into operation, meaning there was no applicable mandatory postponement period. Instead, the relevant postponement periods were only those given by the Service in Notices 2020-17,23 2020-18,24 and 2020-20.25

Second, the Preamble acknowledges that after the Stafford Act section 501 declaration made in his March 13, 2020 letter, the President issued multiple Stafford Act section 401 declarations for each and every one of the 50 states. Each of those did contain an earliest incident date: January 20, 2020. However, because the Service did not exercise its discretion in response to those declarations (having already done so in response to the Stafford Act section 501 declaration), the Preamble says those declarations could not operate to create a mandatory postponement period.26

II. COMMENTS AND RECOMMENDATIONS

We support the attempt to bring some certainty to the operation of section 7508A(d), a poorly worded statute. We are concerned, however, that the proposed regulations do not give sufficient weight to the purpose of subsection (d) to remove discretion from the Service. We offer the following comments.

A. Relationship of Subsection (d) to Subsection (a)

The proposed regulations interpret § 7508A(d) as not disturbing the discretion given the Service to decide which of the acts listed in § 7508(a)(1) are to be suspended in reaction to a federally declared disaster. The regulations provide that if the Service does not exercise its subsection (a) discretion at all, then then mandatory period of suspension provided for in § 7508A(d) has no effect. Similarly, the regulations provide that when the Service does exercise its subsection (a) discretion, subsection (d) applies to only those acts for which the Service has created a postponement period, in exercise of its subsection (a) discretion.

We believe this aspect of the proposed regulations is consistent with the statute and with the current similar interpretation of subsection (a) found in Treas. Reg. 1.7508A-1. Accordingly, we support the resulting bright line rule that subsection (d) is operational only to the extent that the Service exercises its discretion under subsection (a). Subsection (d) is not self-executing.

The alternative interpretation would be that subsection (d) automatically creates a mandatory postponement period for all the actions listed in § 7508(a)(1) anytime there is a federally declared disaster. That would require reading subsection (d) as quite a blunt instrument, overriding the discretion given in subsection (a) and requiring all acts listed in § 7508(a)(1) be postponed — including acts by the government. It would overrule the discretion Congress has plainly given the Service in subsection (a). Also, by triggering the postponement of acts in all federally declared disasters increase the number of disasters with federal tax implications from approximately 15% of the disasters each year to 100% causing the full panoply of suspensions in many situations with attendant surprising and far-reaching consequences.

The alternative interpretation is not supported by text, legislative history, or policy.

First, the text in subsection (d) does not support this alternative interpretation, despite some of the broad language in the relatively thin legislative history and in the titles to the provision. The text of subsection (d)(1) simply describes a period of time that “shall be disregarded in the same manner as a period specified under subsection (a).” The ordinary meaning of the phrase “in the same manner as” is one of reference. It directs the IRS to apply the described period “just like” it applies the periods specified in subsection (a). That reference thus necessarily relies upon what constitutes “a period specified under subsection (a).” Subsection (a), however, does not, in and of itself, specify any time periods. It is not self-executing. It does not create any period at all. It instead authorizes the Service to create a period of suspension. If the Service does not affirmatively act to create a period of suspension, then there is simply no “period specified in subsection (a)” upon which the mandatory period of time in subsection (d) can operate.

Congress might have written subsection (d) as overriding the discretion granted the Service in subsection (a). It might have written “The period beginning . . . and ending . . . shall be disregarded for all acts listed in § 7508(a)(1).” Or perhaps it might have written: “The period beginning . . . and ending . . . shall be disregarded in the same manner as a period specified under subsection (a) would be disregarded regardless of whether the Secretary actually specifies any period of suspension for any of the acts listed in § 7508(a)(1).”

But Congress did not write such language. Without a direct reference to § 7508(a)(1), subsection (d) does not contain text to support an interpretation that it changes subsection (a) from a discretionary to a mandatory provision applicable without action by the Service.

Additionally, as to text, we note that § 7508A(d)(4) enumerates a specific list of actions with respect to pensions to which mandatory postponement applies. The absence of a similar specific enumeration in Section 7508A(d)(1) (or cross reference to specific actions in Section 7508(a)(1)) further supports the view that subsection (d) does not override the Secretary's discretion with respect to which § 7508(a)(1) acts are to be postponed by reason of § 7508A(d).

Second, the legislative history of § 7508A(d) does not support the alternative interpretation. No legislative committee held hearings from which can be discerned the mischief sought to be corrected by subsection (d). There are no floor statements or colloquies. The only evidence of intent comes in the The House Ways and Means Report H. Rept. No. 116–379 (Jan. 21, 2020). That evidence is inconsistent. One part of the House Report shows an intent to create a mandatory extension only for taxpayer filing obligations. Another part shows an intent to create a mandatory extension for all the acts listed in § 7508(a)(1).

Specifically, the “Explanation of Provision” reflects a belief that section subsection (d) creates a mandatory postponement period for all the acts listed in section 7508(a)(1):

The provision provides to qualified taxpayers in the case of a Federally declared disaster a mandatory 60-day period that is disregarded in determining whether the acts [described in section 7508(a)(1)] were performed in the time prescribed. . . .

However, the immediately preceding “Reasons for Change” section says that the reason for section 7508A(d) was to create “an automatic extension of filing deadlines for taxpayers affected by Federally declared disasters” in order to “ease the burden of tax compliance for taxpayers dealing with the hardship of disaster recovery.” H. Rept. at p. 99 (emphasis supplied).

In light of these conflicting statements, and in light of the well settled interpretation of subsection (a) as granting discretion, as reflected in Treas. Reg. § 1.7508A-1, it would require much clearer text in subsection (d) to create a mandatory period for all the acts listed in § 7508(a)(1) regardless of what the IRS does under its § 7508A(a) authority.

Third, considerations of tax policy strongly counsel against the alternative interpretation. Both in theory and in practice FEMA disaster determinations are not coterminous with the Service's § 7508A relief determinations.

As to theory, the process by which FEMA disaster declarations are made is not connected to determinations regarding tax obligations of the affected populations. See generally, Francis X. McCarthy, “FEMA's Disaster Declaration Process: A Primer,” Congressional Research Service Report R43784 (Nov. 12, 2014). They are, at bottom, the result of a political process that considers not only degree of impact of an event, but also the political relationships between the federal and state elected officials. As the CRS Report notes on page 28: “The disaster declaration process . . . remains a process that can be observed and evaluated as it occurs in the area affected by the disaster, and grows opaque as it moves up through layers of FEMA and DHS management to the White House.” In contrast to the FEMA declaration process, the Service makes decisions on granting relief based on its evaluation of the declared disaster's impact on taxpayers' ability to comply with their tax obligations and on the Service's ability to administer tax laws fairly.

As to practice, the Service empirically does not provide relief for all FEMA major disaster declarations. For example, this search of the FEMA website shows that in 2017 FEMA posted 59 major disaster declarations. The Service provided § 7508A relief in response to 14 of them. For example, flooding occurred in Idaho in March 2017. The State immediately declared a state disaster for seven counties. See State Disaster Declaration for Seven Idaho counties | Office of Emergency Management. However, only two of those counties received a FEMA disaster declaration and then not until October. The Service did not provide relief in response to the October declaration.

In the Idaho example, it would not be good tax policy to automatically treat taxpayers in the two Idaho counties that received federal disaster aid different from taxpayers in the five flooded counties who did not receive federal aid, because the disaster declaration process is not about tax compliance but is about provision of federal aid. Moreover, to automatically suspend all acts listed in § 7508(a)(1) for taxpayers in the two Idaho counties would create traps for unwary taxpayers. Some of the acts listed in § 7508(a)(1) are acts that may be taken by the government, such as assessment and collection.

For these reasons, we believe the proposed regulations properly preserve the Service's discretion, granted by subsection (a), to determine which declared disasters are deserving of what kind of timing relief.

B. Definition of “Federally Declared Disaster”

Prop. Treas. Reg. § 1.165-11(b)(1) would define the term “federally declared disaster” to mean any declaration issued under the authority of the Stafford Act, including emergency declarations. We believe the statutory term is limited to major disaster declarations and recommend deleting this regulatory definition or changing it to reflect that a federally declared disaster are those declarations issued under section 401 of the Stafford Act.

Section 7508A(a) provides that the discretion to create postponement periods is triggered by “a federally declared disaster (as defined by section 165(i)(5)(A)).” Thus, the statute provides that the term “federally declared disaster” has the same meaning for purposes of section 7508A as it does for purposes of section 165. Section 165(i)(5)(A), in turn, defines the term to mean “any disaster subsequently determined by the President of the United States to warrant assistance by the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.”

Likewise, Treas. Reg. § 301.7508A-1(b)(1) accepts and uses the definition of “federally declared disaster” found in section 1033(h)(3), which itself cross-references section 165(i)(5) by providing that the “terms 'federally declared disaster' and 'disaster area' shall have the respective meaning given such terms by section 165(i)(5).”

Several aspects of this statutory definition foreclose the attempt by the Proposed Regulations to expand the term to include emergency declarations issued per section 501 of the Stafford Act.

First, both section 165(i)(5) and the implementing Regulation, Treas. Reg. § 1.165-10, use the term “disaster” exclusively. Neither source of law mentions the term “emergency.” The term “disaster” is not ambiguous. Reflecting the fundamental distinction between disaster declarations and emergency declarations, the Stafford Act itself separately defines the terms “major disaster” and “emergency.” The Stafford Act defines a “major disaster” as:

[A]ny natural catastrophe . . . or, regardless of cause, any fire, flood, or explosion, in any part of the United States, which in the determination of the President causes damage of sufficient severity and magnitude to warrant major disaster assistance under this chapter to supplement the efforts and available resources of States, local governments, and disaster relief organizations in alleviating the damage, loss, hardship, or suffering caused thereby.27

This definition of “major disaster” first defines what events are disasters (“catastrophes . . .”) and then sets out the criteria for determining when such events become major (“which . . . causes damage or sufficient severity . . .”).

Second, section 165(i)(5)(A) does not refer solely to disasters but also contains the limitation that only those disasters that are “subsequently determined . . . to warrant assistance” are federally declared disasters within the meaning of the statute (and, hence, within the meaning of section 7508A).

This second requirement matches almost precisely the definition of “major disaster” in the Stafford Act. The Stafford Act does not permit the President to issue declarations for any and all disasters, but only for disasters that are “of sufficient severity and magnitude to warrant major disaster assistance.”28 Likewise, section 165(i)(5)(A) does not provide taxpayers relief for any and all disasters, but only for disasters that are “subsequently determined . . . to warrant assistance.” That is the very definition of a major disaster.

Third, section 165(i)(5)(A) contains a timing requirement: a federally declared disaster is only an event that is later declared to be a disaster. This again is very different than an emergency declaration, which can, and often is, issued before an anticipated disaster. Emergency declarations thus may or may not contain an earliest incident date and may simply be open-ended sources of authority to grant federal assistance. They may well pre-date the onset of an anticipated disaster. This timing element contained in section 165(i)(5)(A) removes any potential doubt that the definition of a federally declared disaster tracks to Stafford Act section 401 disaster declarations and cannot be stretched to include Stafford Act section 501 emergency declarations.

Fourth, the relief provided by section 7508A is to a “taxpayer . . . affected by a federally declared disaster.”29 Similarly, the relief in section 165(i) is targeted to taxpayers in disaster areas. That strongly parallels the relief authorized by major disaster declarations under section 401 of the Stafford Act — relief to individuals (and not exclusively to governments). It does not implicate the relief triggered by emergency declarations under section 501 of the Stafford Act, which does not permit federal government assistance to individuals.

It is true that whether an event qualifies for a declaration of major disaster or a declaration of emergency under the Stafford Act is at times uncertain.30 That uncertainty, however, does not eliminate the distinction in the law between disaster declarations and emergency declarations. In any event, there is no hint in the Stafford Act that a declaration issued under section 501 would ever be termed a disaster declaration. Those are emergency declarations.

The COVID-19 pandemic is a good example of the difference between emergency and disaster declarations. There, President Trump issued a letter on March 13, 2020, declaring a national emergency. That was a sua sponte declaration as authorized under section 501(b) of the Stafford Act.31 The letter was not a disaster declaration. (“My decision to make this determination pursuant to section 501(b) of the Stafford Act is based on the fact that our entire country is now facing a significant public health emergency.”)32

The March 13, 2020, letter has no earliest incident date. However, shortly thereafter, each state government prepared and submitted requests for disaster declarations as authorized under section 401 of the Stafford Act. As per the Stafford Act, the President subsequently determined that major disaster relief was warranted. Each of those declarations did contain an earliest incident date. We are aware that President Trump's March 13, 2020, letter specifically directed the Secretary of the Treasury to exercise his authority under section 7508A(a). However, that directive begs the question. A President cannot direct an agency head to take actions not authorized by Congress. The March 13, 2020, letter simply has no weight in the proper interpretation of the definition of “federally declared disaster” for purposes of section 7508A.

For these reasons, we recommend that the final regulations either omit a definition of “federally declared disaster” or else define the term to mean those disasters declared under the authority of section 401 of the Stafford Act.

C. Which Stafford Act Declarations Count?

The Proposed Regulations contain various rules for how to determine the applicable mandatory period. We are concerned that those rules undermine the intent of Congress to create some kind of mandatory period. We identify two problems and offer recommendations as to each.

1. The Pick-And-Choose Problem

First, the Proposed Regulations allow the Service to pick and choose which declaration it wants to base its discretion on. Under the Proposed Regulations, if the Service picks a declaration that contains no initial incident date, then there is no applicable mandatory period.

This is problematic because of the proposed interpretation of “federally declared disaster” as including emergency declarations. That interpretation means there may be multiple applicable declarations. For example, the President might issue an emergency declaration in view of an approaching hurricane, and then issue a disaster declaration shortly after the event starts. The Proposed Regulations allow the Service to choose the emergency declaration as the document on which to exercise is subsection (a) discretion.

The Proposed Regulation's pick-and-choose approach gives insufficient weight to the clear intent of Congress to create a mandatory period, because nothing prevents the Service from picking a declaration that has no initial incident date, such as a typical emergency declaration that might be issued before a disaster strikes. Thus, allowing the Service to choose which declaration will be the relevant declaration creates uncertainty and likely litigation.

We offer one recommendation and two alternative recommendations to better align the Proposed Regulations with the intent of subsection (d) while preserving the flexibility and discretion inherent in subsection (a).

First, we reiterate the above recommendation that the final Regulations provide that “federally declared disasters” are only those contained in major disaster declarations issued under section 401 of the Stafford Act. That would eliminate the problem of multiple declarations addressing the same disaster.

Second, in the alternative, we recommend that the final Regulations contain a bright line rule to address multiple relevant declarations. For example, the final Regulations might contain a first-out rule, or might contain a rule that provides a later major disaster declaration will trump an earlier emergency declaration.

Third, and again in the alternative, we recommend that the final Regulations provide that the issue date of an emergency declaration be deemed to be the earliest incident date for purposes of subsection (d)'s mandatory period.

2. The Amendment Problem

Section 7508A(d) requires an earliest and latest incident date in order to calculate the mandatory period. The Proposed Regulations are very helpful in providing counting rules for situations when the first-out declaration (whether a disaster declaration or an emergency declaration) is missing one or both of those dates.

It would be helpful if the final Regulations also addressed the effect of amendments or modifications to whichever declaration is the relevant declaration that triggers section 7508A. As explained in the Preamble, it is typical for the Federal Emergency Management Agency (“FEMA”) to modify a disaster declaration by later adding a latest incident date. For example, when Hurricane Sally struck Florida in 2020, the initial disaster declaration was issued on September 23, 2020, and provided only an initial incident date.33 The initial incident date was September 14, 2020. However, the disaster declaration was amended on September 28, 2020, to provide that “notice is hereby given that the incident period for this disaster is closed effective September 28, 2020.”34

The Proposed Regulations are silent on the effect of the amendment on the mandatory period calculation. If later amendments had no effect, then the relevant mandatory postponement period for Hurricane Sally would be one year because the initial declaration contained an initial incident date but no latest incident date. However, if the later amendment is effective then the subsection (d) mandatory period would end 60 days after September 28, 2020. The silence of the Proposed Regulations invites litigation.

Not all later amendments occur quickly. For example, the major disaster declaration for the U.S. Virgin Islands in the wake of Hurricane Maria was made on September 20, 2017, and initially described the disaster as “beginning on September 16, 2017, and continuing. . . .”35 The declaration was amended six times between October 2017 and June 2018. It was not until the fourth amendment, issued in late November, that FEMA announced a latest incident date of September 22, 2017.36

In light of COVID-19, it is conceivable that a later amendment might occur more than one year after the initial relevant declaration. For example, the section 401 Stafford Act disaster declarations issued on or around March 20, 2020, might be amended sometime in 2021 to provide a latest incident date that is more than one year after the initial incident date. It would be helpful for the final Regulations to address that possibility as well since the use of incident dates for FEMA purposes may or may not properly overlap with their use for subsection (d) purposes.

The third example provided in the Proposed Regulations indicates that the postponement period under (d) will change if and when FEMA amends the closing incident date.37 However, the example does not indicate what time limits, if any, apply to amendments. Further, it is not clear that the example ties into any stated rule in the Proposed Regulations.

Accordingly, we recommend that the final Regulations contain a rule that explains how the Service will treat amendments to the relevant declarations, and then provide one or more illustrations for how the stated rules will operate. For example, the Service might promulgate a rule that says future amendments will not affect how taxpayers are to calculate the applicable mandatory period. Thus, when a declaration contains an initial incident date but no latest incident date, the initial incident date will be deemed to also be the latest incident date and taxpayers should calculate 60 days from the initial incident date as the mandatory period. Or the Service might promulgate a rule that says only amendments to a declaration made within a certain amount of time after the initial declaration — say one year — will affect the computation of the mandatory period.

D. Interpreting a Challenging Statute

All of the above comments recognize that the Proposed Regulations take a narrow interpretation of what is mandatory under subsection (d). That narrow interpretation is consistent with the plain text described above, even considering the contrary interpretation provided in the House Report and comments from Representative Tom Rice discussed above. Without clearer statutory language or legislative history, we support an approach that preserves the Service's discretion to act, subject to our comments above that the final Regulations give appropriate weight to the general intent of subsection (d) to create certainty that taxpayers know when there will be a mandatory period and can easily calculate it.

A narrow interpretation seems especially appropriate when considering the broad list of acts described in section 7508(a)(1) and complexities of administering federal tax laws to an incredibly diverse population of taxpayers. It is also appropriate when the Service is confronted with situations like the COVID-19 pandemic, where what starts out as a crisis becomes a new normal.

FOOTNOTES

1Robert T. Stafford Disaster Relief and Emergency Assistance Act, Pub. L. No. 100-707, Title I, 102 Stat. 4689 (1988), codified at 42 U.S.C. §§ 5121-5207 (the “Stafford Act”).

2I.R.M. 1.2.2.14.11 (07-24-2017) (Delegation Order 25-11 (Rev. 3)), “Granting Relief to Taxpayers Affected by Disasters or Terrorist or Military Actions.”

3Treas. Reg. § 301.7508A-1(b)(1). See also Treas. Reg. § 301.7508A-1(a).

4Treas. Reg. § 301.7508A-1(b)(1)(i) (using the phrase “any or all” to explain the discretion).

5See generally, Francis X. McCarthy, “FEMA's Disaster Declaration Process: A Primer,” Congressional Research Service Report R43784 (Nov. 12, 2014) (CRS Report), available at https://fas.org/sgp/crs/homesec/R43784.pdf (last visited Mar. 5, 2021).

642 U.S.C. § 5170.

7CRS Report, supra, at 1 (“a major disaster declaration is made as a result of a disaster or catastrophic event.”).

8See, e.g., CRS Report, supra (using the term “disaster declaration” 59 times, and the term “major disaster declaration” 14 times). For example, “Over the last quarter century, the amount of federal assistance provided through presidential disaster declarations has exceeded $150 billion.” CRS Report, supra, at 1.

942 U.S.C. § 5191.

1042 U.S.C. § 5191(b).

1142 U.S.C. § 5192(b).

12Stafford Act, section 502(c) (emphasis added), codified at 42 U.S.C. § 5192(c).

13CRS Report at 1 (emphasis added).

14Pub. L. No. 116-94, Division Q, § 205, 133 Stat. 2534, 3245-46.

15H. Rept. No. 116–379 (Jan. 21, 2020), available at https://www.congress.gov/116/crpt/hrpt379/CRPT-116hrpt379.pdf (last visited Mar. 5, 2021).

16Id. at 99.

17Id. at 99. This interpretation was also articulated by Representative Tom Rice after the legislation was enacted. See Richard Rubin, “IRS Rejects Congressman's Argument That Trump Emergency Declaration Suspends Tax Payments,” Wall Street Journal (Mar. 20, 2020), available at https://www.wsj.com/articles/irs-rejects-congressmans-argument-that-trump-emergency-declaration-suspends-tax-payments-11584712800 (last visited Mar. 5, 2021).

18Prop. Treas. Reg. § 1.165-11(b)(1).

19Prop. Treas. Reg. § 301.7508A-1(g)(2). The Proposed Regulations also apply subsection (d) where the Service has exercised its discretion under subsection (b); for purposes of clarity, these Comments do not address the separate exercise of discretion under subsection (b).

20Prop. Treas. Reg. § 301.7508A-1(g)(1).

21Prop. Treas. Reg. § 301.7508A-1(g)(3).

2286 Fed. Reg. at 2,612.

23Notice 2020-17, 2020-15 I.R.B. 590.

24Notice 2020-18, 2020-15 I.R.B. 590.

25Notice 2020-20, 2020-16 I.R.B. 660.

2686 Fed. Reg. at 2,612-13.

2742 U.S.C. § 5122(2).

2842 U.S.C. § 5122(2).

29I.R.C. § 7508A(a) (emphasis added).

30See Edward C. Liu, “Would an Influenza Pandemic Qualify as a Major Disaster Under the Stafford Act?”, CRS Report RL34724 (Oct. 28, 2008) (concluding that the issue “was not addressed by Congress” and that “neither inclusion nor exclusion of flu pandemics from major disaster assistance is explicitly required by the current statutory language.”), available at https://fas.org/sgp/crs/misc/RL34724.pdf (last visited Mar. 5, 2021).

31FEMA HQ-20-017-FactSheet (March 14, 2020) (“COVID-19 Emergency Declaration”), available at https://www.fema.gov/press-release/20210121/covid-19-emergency-declaration (last visited Mar. 5, 2021).

32Letter from President Donald J. Trump on Emergency Determination Under the Stafford Act (March 13, 2020), available at: https://trumpwhitehouse.archives.gov/briefings-statements/letter-president-donald-j-trump-emergency-determination-stafford-act/ (last visited Mar. 5, 2021).

33FEMA-4564-DR, Presidential Declaration of a Major Disaster for Public Assistance Only for the State of Florida (issued Sept. 23, 2020), 85 Fed. Reg. 63,159 (Oct. 6, 2020), available at https://www.federalregister.gov/d/2020-22015 (last visited Mar. 5, 2021).

34FEMA-4564-DR, Florida; Amendment No. 4 to Notice of a Major Disaster Declaration, available at https://www.fema.gov/disaster-federal-register-notice/dr-4564-fl-amendment-004 (last visited Mar. 5, 2020), This was published in the Federal Register at 85 Fed. Reg. 72,675 (Nov. 13, 2020), available at https://www.federalregister.gov/d/2020-25087 (last visited Mar. 5, 2021).

35FEMA-4340-DR, Virgin Islands; Major Disaster and Related Determinations, 82 Fed. Reg. 46,813 (Oct. 6, 2017), available at https://www.federalregister.gov/d/2017-21632 (last visited Mar. 5, 2021).

36FEMA-4340-DR, Virgin Islands; Amendment No. 4 to Notice of a Major Disaster Declaration, 82 Fed. Reg. 57,774 (Dec. 7, 2017), available at https://www.federalregister.gov/d/2017-26335 (last visited Mar. 5, 2021).

37Prop. Reg. § 301.7508A-1(g)(5)(iii).

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