Refund Opportunities After Kwong v. United States and the Disaster-Related Extension of Deadlines Act

The Internal Revenue Code contains multiple provisions addressing timing of filing returns, filing a claim for a refund, and filing suit to claim a refund. Specifically, IRC Sec. 6532(a) provides a two-year limitations period for filing suit to claim a refund. Now, both Kwong v. United States and a recent legislative change open the door for taxpayers whose IRC Sec. 6532(a) deadline to file a refund suit fell during a federally declared disaster, such as the COVID-19 period (January 20, 2020, to July 10, 2023) but after the two-year deadline to otherwise argue that their refund suits were timely filed. 

IRC. Secs. 6532 and 7508A Explained 

Generally, taxpayers must meet certain deadlines, including any claims for refund, by the corresponding statutory filing deadline. However, IRC Sec. 7508A allows the IRS to extend the time to file for up to one year for taxpayers who are impacted by a federally declared disaster, significant fire, or terrorist attack. Former IRC Sec. 7508A(d)) also stipulated that taxpayers be given a mandatory extension of time to file for the period of time beginning on the earliest declared incident date and ending 60 days after the latest incident date. At the same time, IRC Sec. 6532(a) provides that no suit for recovery of any tax or penalty may be filed after two years from the date of the mailing of a notice to a taxpayer. As Kwong shows, these sections have appeared to allow for a timing mismatch. 

The Court’s Holding on Timeliness 

The taxpayer, Terry Kwong, sought refunds of penalties for 2007, 2010, 2011, 2015, and 2016. The government argued that the refund suit claims for 2007, 2010 and 2011 were barred by IRC Sec. 6532(a)’s two-year limitation, because the IRS mailed disallowance notices in September and October 2020 and suit was not filed until February 2023.  

The Court of Federal Claims held that, under IRC Sec. 7508A(d) as in effect in 2019, the mandatory postponement period for qualified taxpayers in a federally declared disaster ran from January 20, 2020 (the earliest incident date in the COVID-19 declaration) until 60 days after the latest incident date. The Federal Emergency Management Agency ultimately set the latest incident date as May 11, 2023, thus producing an automatic extension through July 10, 2023. Because that entire period “shall be disregarded” in computing the IRC Sec. 6532(a) window, Mr. Kwong’s February 2023 suit was timely for the pre-COVID years.​ 

Reading of IRC Sec. 7508A(d) and Rejection of IRS view 

The Court read the 2019 version of IRC Sec. 7508A(d) literally: The mandatory period ran from the earliest incident date “to the date which is 60 days after the latest incident date so specified,” which, in the COVID-19 context, meant the entire multiyear declaration plus 60 days. The opinion expressly rejected the government’s argument, reflected in Treas. Reg. Sec. 301.7508A1(g)(3)(ii), that the mandatory 60-day period can never result in more than one year being disregarded, concluding that the regulation “misread” the statute and that the court was bound by the plain text after the Supreme Court’s decision in Loper Bright Enterprises rather than agency deference.​ 

Interaction with Abdo and Later IRC Sec. 7508A(d) Amendments 

Kwong is a positive follow-on to the Tax Court’s April 2024 ruling in Abdo v. Commissioner, which held that IRC Sec. 7508A(d) automatically postponed certain Tax Court filing deadlines but left open the outer limits of the extension when a disaster declaration omitted an end date.  

In Kwong, the court emphasized that Congress’s 2021 amendment to IRC Sec. 7508A(d) (and a further 2025 amendment) changed the structure from an effectively open-ended extension tied to the “latest incident date” to a capped 60 (now 120) day rule, and it noted that the 2021 amendment, by its own terms, applied only to disasters declared after enactment, and therefore did not affect COVID-19.​ 

The Disaster Related Extension of Deadlines Act 

On December 26, 2025, the Disaster Related Extension of Deadlines Act (P.L. 119-64) was signed into law. This law requires the IRS to treat the postponement of a federal tax return deadline due to a federally declared disaster or certain other events as an extension of such deadline for purposes of making a refund claim. 

Generally, a claim for refund must be filed within three years of the date that the federal tax return is filed. The refund amount is limited to taxes paid within the three years preceding the tax refund claim plus any extension of the federal tax return deadline (lookback period). The Disaster Related Extension of Deadlines Act modifies the language in IRC Sec. 7508A to include the disaster-related postponement period in the lookback period calculation, just as the Tax Code already does for returns filed pursuant to an extension. By including the postponement period in the lookback calculation, the law ensures that timely refund claims result in actual refunds to taxpayers. 

Practical Implications 

For refund suit litigation, Kwong offers a roadmap to argue timeliness where suits were filed after the two-year period but still within the COVID-19 period (January 20, 2020 to July 10, 2023), at least for taxpayers in jurisdictions likely to look to the Court of Federal Claims and Federal Circuit.  

Both the Disaster Related Extension of Deadlines Act and the Kwong decision on the reach and timing of IRC Sec. 7508A may create broader opportunities for individuals who paid interest and penalties related to filings and payments made during the COVID-19 period. There may be opportunities for those taxpayers to contest potentially missed filing and payment deadlines and seek refunds for payments of date-related penalties and interest.  

If you believe you might be entitled to a refund, contact us below to see how we can assist you.