Government says Kwong court misread COVID tax relief law

In its opening brief in a case that could affect millions of taxpayers and billions of dollars in potential refund claims, the federal government argued that a lower court misread a COVID-era tax relief law, turning a 60-day extension into a postponement period lasting more than three years.

The government asked the U.S. Court of Appeals for the Federal Circuit to reverse the Court of Federal Claims and dismiss Terry Kwong’s refund claims for tax years 2007, 2010, and 2011 as untimely.

In Kwong, 179 Fed. Cl. 382 (2025), the Court of Federal Claims held that the two-year deadline in Sec. 6532(a)(1) for filing a refund lawsuit was automatically postponed under Sec. 7508A(d) during the COVID-19 disaster period. The court concluded that the postponement period began Jan. 20, 2020, and ended July 10, 2023, making Kwong’s lawsuit, filed Feb. 23, 2023, timely.

Incident date vs. FEMA incident period

The government’s principal argument is that the court improperly relied on the COVID-19 “incident period” set by the Federal Emergency Management Agency (FEMA) rather than the “incident date” specified in the presidential disaster declaration.

In Kwong’s case, the relevant declaration was the California COVID-19 disaster declaration, which the government said specified one incident date, Jan. 20, 2020. As a result, the brief argued, the mandatory postponement period ended 60 days later, on March 20, 2020.

“The statute means what it says,” the government wrote in its summary of argument. “A date is a date, not ‘and continuing.’”

The brief argues that Congress deliberately tied Sec. 7508A(d) to incident dates in presidential disaster declarations rather than FEMA incident-period determinations. The government noted that Congress used the term “incident period” elsewhere in the Taxpayer Certainty and Disaster Tax Relief Act of 2019 (Division Q of the Further Consolidated Appropriations Act, 2020, P.L. 116-94) but did not use it in Sec. 7508A(d).

The government also challenged the Court of Federal Claims’ reliance on a 2021 amendment to Sec. 7508A(d), arguing that the amendment does not show that the earlier version of the law allowed indefinite postponement periods.

Different view of statute’s structure

More broadly, the government contended that the lower court’s interpretation disrupts the structure of Sec. 7508A. According to the brief, Congress created both a mandatory postponement provision in Sec. 7508A(d) and a discretionary postponement authority in Sec. 7508A(a).

The government argued that if the mandatory provision automatically had postponed tax deadlines for more than three years, much of Treasury’s discretionary relief authority would become unnecessary.

The brief points to a number of IRS discretionary postponements, including Notice 2020-23, Update to Notice 2020-18, Additional Relief for Taxpayers Affected by Ongoing Coronavirus Disease 2019 Pandemic, and Notice 2021-21, Relief for Form 1040 Filers Affected by Ongoing Coronavirus Disease 2019 Pandemic, as examples of Treasury’s use of its discretionary authority during the pandemic.

The government also relied on Sec. 7508A(d)’s heading, “Mandatory 60-day extension,” arguing that it reflects Congress’s expectation that the provision would provide automatic but limited relief rather than an open-ended suspension of tax deadlines.

The government warned that the ruling could have consequences beyond Kwong. The Court of Federal Claims’ interpretation could affect tens of millions of taxpayers and expose Treasury to tens of billions of dollars in potential refund claims because it effectively postpones numerous taxpayer and government deadlines from Jan. 20, 2020, through July 10, 2023, the brief said.

As alternative arguments, the government said that if the phrase “and continuing” must be treated as affecting the calculation of the postponement period, the latest incident date should be March 22, 2020, the date of the California disaster declaration, resulting in a postponement period ending May 21, 2020.

It also argued that even under a broader reading of the statute, the mandatory postponement period could not exceed one year because of Sec. 7508A(a)’s one-year limitation and related Treasury regulations.

AICPA Kwong resources

An AICPA resource page has a mix of public resources and those that require member login. The page includes updated FAQs, which include a checklist to help CPAs determine next steps for clients related to Form 843, Claim for Refund and Request for Abatement.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.