‘Intent to evade tax’ for purposes of Sec. 6501(c) not limited to taxpayer’s intent

The Third Circuit held that the intent necessary to apply the extended assessment period for a false or fraudulent return with intent to evade tax under Sec. 6501(c)(1) is not limited to a taxpayer’s intent, affirming the Tax Court.

Facts: From 1993 to 1999, Stephanie Murrin’s tax preparer made false or fraudulent entries on her tax returns with an intent to evade tax. This resulted in Murrin’s unintentionally underpaying tax for those years. In 2019, the IRS sent Murrin a notice of deficiency related to her underpayments from 1993 to 1999. Murrin petitioned the Tax Court for a redetermination of the deficiency, arguing that the IRS had not made its assessment within the three-year statute of limitation in Sec. 6501(a). The Tax Court held that because Murrin’s tax preparer prepared her returns with an intent to evade tax, Sec. 6501(c)(1) applied and, therefore, the statute of limitation did not bar the IRS’s assessment of her over-20-year-old deficiency (Murrin, T.C. Memo. 2024-10). Murrin appealed the Tax Court’s decision to the Third Circuit.

Issues: Sec. 6501(a) provides that, generally, the IRS has up to three years after the date a return is filed to assess any tax imposed by the Code. There are, however, exceptions, including Sec. 6501(c)(1), which states, “In the case of a false or fraudulent return with the intent to evade tax, the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time.” Murrin argued that this exception did not apply because she did not intend to evade tax; it was her tax preparer who had the intent to evade tax. As a result, the issue before the court was to determine whose intent is required to trigger the exception.

The Third Circuit examined the issue from three angles. First, the court analyzed the statutory text, finding that Sec. 6501(c)(1) did not contain any express or implied textual indication that the “intent to evade tax” is confined to the taxpayer. Instead, the court determined that the statute simply focuses on there being an “intent to evade tax” connected with a “false or fraudulent return.” According to the court, neither of these requirements “facially includes any indication that the taxpayer must be the actor who intends to evade tax.”

The court explained that although an “intent to evade” is related to the taxes a taxpayer owes, the “plain meaning of the words does not imply a specific actor.” In addition, the court reasoned that Congress’s use of the passive voice in the statute indicates that it was “agnostic about who” intended to evade tax. The court noted that Congress focused on an event that occurs without respect to a specific actor and, therefore, without respect to any specific actor’s intent or culpability. Furthermore, Congress drafted Sec. 6501(a) expressly using the term “taxpayer” to define the return at issue but “declined to use the same qualifier in [Sec.] 6501(c)(1).” The Third Circuit pointed to the opinion in Bittner, 598 U.S. 85, 94 (2023), in which the Supreme Court stated “[w]hen Congress includes particular language in one section of a statute but omits it from a neighbor, we normally understand that difference in language to convey a difference in meaning.”

Second, the court examined the statutory context of Sec. 6501(c)(1), noting that “a fundamental canon of statutory construction [is] that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme” (West Virginia v. EPA, 597 U.S. 697, 721 (2022) (quoting Davis v. Michigan Department of Treasury, 489 U.S. 803, 809 (1989)). The court explained that Congress knows how to limit the scope of a statute’s reach when it intends to. For example, the IRC’s fraud provisions in Secs. 6663, 6664, and 7454 expressly reference the taxpayer’s conduct. Congress also knows how to limit statutes to third parties. For example, Sec. 6694(a) imposes penalties on tax preparers for taking unreasonable tax positions. The court concluded that it was “difficult to believe that despite Congress limiting provisions elsewhere by reference to a taxpayer’s conduct or allegations directed against the taxpayer, Congress included a limitation within ‘a false or fraudulent return with the intent to evade tax’ despite not saying so.”

Finally, the Third Circuit examined the relevant precedent, starting with the Supreme Court’s analysis of Congress’s use of the passive voice. In a case concerning the Bankruptcy Code, the Supreme Court held in Bartenwerfer v. Buckley, 598 U.S. 69, 76 (2023), that the passive voice “pull[ed] the actor off the stage” and found that “all the Bankruptcy Code required was that ‘debt must result from someone’s fraud.'” The Third Circuit found that, like the language at issue in Bartenwerfer, Sec. 6501(c)(1) does not identify who must intend to evade tax. Instead, the court stated, it “focuses on an event without regard to an actor — that is, Congress focused on a ‘false or fraudulent return with the intent to evade tax’ without saying who must act.” Thus, it was clear to the court that Congress’s reasoning was that “[t]he statute of limitations does not apply when someone intends to evade tax in the filing of a false or fraudulent return, taxpayer or not.”

In the Third Circuit’s view, the Bartenwerfer passive-voice analysis also aligned with the Supreme Court’s last opinion interpreting Sec. 6501(c) Badaracco, 464 U.S. 386 (1984). In that case, the Court found that a statute of limitation like Sec. 6501(c) “must receive a strict construction in favor of the Government.” Because Murrin’s position was similar to the taxpayer’s position in Badaracco, the Third Circuit found nothing in the case law from the Supreme Court that supported Murrin’s argument that it was only the taxpayer’s intent that mattered. Instead, the court found that the case law supported the opposite conclusion.

Murrin argued that affirming the Tax Court would “reject[] 100 years of tax jurisprudence,” but the Third Circuit determined it would not. The Third Circuit noted that the Tax Court has “applied [Sec.] 6501(c)(1) in the context of a non-taxpayer’s intent on several occasions, including on returns prepared by the same tax preparer Murrin used” (Finnegan, T.C. Memo. 2016-118; and Ames-Mechelke, T.C. Memo. 2013-176). The Third Circuit concluded that its current holding simply continues “the well-trod ground laid by the Tax Court.”

Holding: The Third Circuit, affirming the Tax Court, held that the “intent to evade tax” in Sec. 6501(c) was not limited to the taxpayer’s intent. Although it acknowledged the financial pain that Murrin faces from its decision and that it may seem unfair, the court noted that “while Congress has limited imposing fraud penalties against a taxpayer without a taxpayer’s intent, [Sec.] 6501(c)(1)’s text, context, and precedent establish that Congress was agnostic about whether the taxpayer intended to evade tax for purposes of the IRS’s full and accurate assessment of taxes.”

• Murrin, No. 24-2037 (3d Cir. 10/17/25)

— Matthew Geiszler, Ph.D., is a lecturer in accounting in the Brooks School of Public Policy, and John McKinley, CPA, CGMA, J.D., LL.M., is a professor of the practice in accounting and taxation in the SC Johnson College of Business, both at Cornell University in Ithaca, N.Y. To comment on this column, contact Paul Bonner, the JofA’s tax editor.