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What Does IRC 7508A(d) Do?

Posted on Apr. 29, 2020

The pandemic has brought lots more attention to IRC 7508A which allows the IRS to extend deadlines in the event of certain disasters. Using its authority under IRC 7508A(a) the IRS first announced the extended time to pay taxes, then it announced the extended time to file taxes and then it announced broad extensions including the time to file Tax Court petitions and numerous other acts outlined in Rev. Proc. 2018-58. We have talked about these extensions here and here. Note that the IRS issued expanded FAQs last week regarding the scope and meaning of its Notices granting relief.

Last week I received a question from Sheri Dillon a partner at Morgan Lewis who carries a heavy caseload but does lots of pro bono work. Sheri asked me about 7508A(d). I had never seen or heard of it before.

In December, 2019 Congress passed legislation adding a new subsection IRC 7508A(d) to the extension provisions.  Little attention has been paid to (d) at this point and little is known about exactly how it works and how the IRS thinks it works.  A brief article and a Twitter post by the prolific Dan Hemel raises some issues and the potentially sweeping impact (d) could have.  Another article on the topic appeared in the Wall Street Journal with its tax writer Richard Rubin noting that the IRS rejects the interpretation that (d) has a sweeping impact in the current disaster.

Depending on how (d) is interpreted, it offers significant relief or maybe no relief in the current situation. In the absence of guidance on the meaning of (d), it may be that we will find out what it means through litigation as taxpayers seeking additional time to perform certain acts or to pay certain taxes turn to (d) to provide the relief they seek. If you haven’t read (d) and pondered on its meaning, here is the statute itself:

I.R.C. § 7508A(d) Mandatory 60-Day Extension.—

(d)(1) In General. — In the case of any qualified taxpayer, the period—
(d)(1)(A) — beginning on the earliest incident date specified in the declaration to which the disaster area referred to in paragraph (2) relates, and
(d)(1)(B) — ending on the date which is 60 days after the latest incident date so specified, shall be disregarded in the same manner as a period specified under subsection (a).

(d)(2) Qualified Taxpayer.— For purposes of this subsection, the term “qualified taxpayer” means—
(d)(2)(A) — any individual whose principal residence (for purposes of section 1033(h)(4)) is located in a disaster area,
(d)(2)(B) — any taxpayer if the taxpayer’s principal place of business (other than the business of performing services as an employee) is located in a disaster area,
(d)(2)(C) — any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a disaster area,
(d)(2)(D) — any taxpayer whose records necessary to meet a deadline for an act described in section 7508(a)(1) are maintained in a disaster area,
(d)(2)(E) — any individual visiting a disaster area who was killed or injured as a result of the disaster, and
(d)(2)(F) — solely with respect to a joint return, any spouse of an individual described in any preceding subparagraph of this paragraph.

(d)(3) Disaster Area.— For purposes of this subsection, the term ‘disaster area’ has the meaning given such term under subparagraph (B) of section 165(i)(5) with respect to a Federally declared disaster (as defined in subparagraph (A) of such section).

(d)(4) Application To Rules Regarding Pensions.— In the case of any person described in subsection (b), a rule similar to the rule of paragraph (1) shall apply for purposes of subsection (b) with respect to—
(d)(4)(A) — making contributions to a qualified retirement plan (within the meaning of section 4974(c)) under section 219(f)(3), 404(a)(6), 404(h)(1)(B), or 404(m)(2),
(d)(4)(B) — making distributions under section 408(d)(4),
(d)(4)(C) — recharacterizing contributions under section 408A(d)(6), and
(d)(4)(D) — making a rollover under section 402(c), 403(a)(4), 40 3(b)(8), or 408(d)(3).

(d)(5) Coordination With Periods Specified By The Secretary.— Any period described in paragraph (1) with respect to any person (including by reason of the application of paragraph (4)) shall be in addition to (or concurrent with, as the case maybe) any period specified under subsection (a) or (b) with respect to such person.

You can see there are a number of terms that require interpretation as applied to a disaster declaration in order to determine if (d) applies and the scope of any application. Because this provision starts out with the phrase ‘mandatory’, it catches the eye. Application of this provision in a disaster such as COVID-19 could cause a very long period of suspension and it could start much earlier than the 7508A(a) based Notices that the IRS has issued. Some of the disaster declarations date to January 20, 2020.

This post does not seek to tell you what the new provision means but merely to raise (d) as something that deserves your consideration in deciding the length and scope of the current disaster’s impact on tax deadlines. Even if (d) does not apply to the COVID-19 disaster, it may be important in extending deadlines in more localized disasters of the type probably envisioned in its passing.

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