Treasury and the IRS have issued proposed regulations that would clarify which deadlines get extended when disasters are declared and for how long after an ongoing disaster.
The proposed regs (REG-115057-20), released January 11, contain rules for section 7508A(d), a provision enacted in late 2019 that adds a mandatory 60-day extension to due dates after the declaration of a disaster.
Section 7508A(d) received some attention early in the COVID-19 pandemic because the entire country was covered by federal disaster declarations. The provision 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.”
According to the IRS and Treasury, the proposed regs are intended to answer two questions: which time-sensitive actions get the automatic 60-day delay, and how to calculate that period if the disaster declaration — like the COVID-19 declarations — doesn’t include an incident date. Neither question can be answered from the ambiguous statutory text or the legislative history, according to the preamble.
The preamble notes that section 7508A(a) isn’t self-executing, meaning the Treasury secretary must determine whether a taxpayer is affected by a federally declared disaster and which time-sensitive acts’ deadlines will be delayed.
“Therefore, these proposed regulations provide that the Secretary’s determination under section 7508A(a) of the acts subject to postponement due to a Federally declared disaster is an essential prerequisite to determining the acts to which the mandatory 60-day postponement period applies with respect to that Federally declared disaster for qualified taxpayers,” the proposed regs say.
According to the preamble, Treasury has previously exercised its section 7508A(a) discretion to decline extensions for time-sensitive acts for which the IRS would be responsible, for taxpayer tasks, and sometimes for whole disasters. Because section 7508A(d) invokes section 7508A(a) for the additional 60-day extensions, the secretary’s decision under subsection (a) would control for subsection (d) under the proposed regs.
When the disaster declaration includes an incident date, the mandatory 60-day extension in section 7508A(d) would run at the same time as the discretionary periods under other provisions of the section, according to the proposed regs. That means there would be no additional time if the discretionary extension is longer than 60 days and only 60 days total if it is shorter.
The difficulty would arise if the declaration includes an open-ended time frame, the preamble says. That could lead to an illogical situation in which the section 7508A(d) period would seem to exceed the statutory one-year cap on section 7508A(a), the government says. To resolve the issue, the proposed regs would hold that section 7508A(d) is subject to the same cap as subsection (a).
The proposed regs would resolve another ambiguity — if the declaration has no dates at all — by stating that section 7508A(d) wouldn't apply and only the section 7508A(a) relief would be available. The preamble points out that this situation applies to COVID-19 pandemic deadline relief.
The proposed regs state that because they’ve been issued less than 18 months after section 7508A(d) was enacted (Further Consolidated Appropriations Act, 2020) in December 2019, they can become effective at the same time as the statute.