A federal disaster declaration is meant to give taxpayers room to recover before tax deadlines start working against them again. Congress recognized that reality when it built a disaster relief framework into the tax code, one that has sat largely untested until a federal court was asked to interpret exactly what it requires. The result, Kwong v. United States, 179 Fed. Cl. 382 (2025), has tax attorneys, certified public accountants, enrolled agents, and corporate tax departments across the country reexamining deadlines and assessments they once treated as settled.
This article examines what the court actually held in the Kwong decision, why its reading of Internal Revenue Code Section 7508A(d) carries weight beyond the facts of one taxpayer's dispute, and what it signals about how federal disaster tax relief is likely to be interpreted going forward.
A Provision Built for Emergencies
Section 7508A has existed for decades, giving the Treasury Secretary discretion to grant tax filing deadline extensions and tax payment deadline extensions to taxpayers affected by a federally declared disaster. That discretion worked well after hurricanes and wildfires, where the agency could announce a specific relief period for a specific region. COVID-19 was different. The disaster declaration was not confined to one state or one storm system. It touched every taxpayer in the country at once, and it lasted for years rather than weeks, which is part of why the Kwong decision carries weight for taxpayers across the country and businesses throughout the United States rather than one region alone.
In 2019, Congress added subsection (d), and that addition sits at the center of the Kwong ruling. Internal Revenue Code Section 7508A(d) does not depend on the Secretary's discretion at all. It requires that the period beginning on the earliest incident date of a federally declared disaster, and ending sixty days after the latest incident date, be disregarded when determining whether a taxpayer met a deadline. In plain terms, Congress wrote mandatory disaster-related tax deadline extensions into the law itself, separate from whatever administrative guidance the IRS chooses to issue.
The Dispute in Kwong
The facts are not complicated. The taxpayer in Kwong had refund claims disallowed by the IRS in September and October 2020. Under Section 6532, a taxpayer generally has two years from a disallowance notice to file a refund suit in the Court of Federal Claims. Measured on the calendar, that window appeared to close well before the case reached the court in February 2023. The government, through the Department of Justice, argued the suit was untimely and moved for summary judgment.
Kwong's response rested on that disregard provision. The COVID-19 Public Health Emergency was tied to a federally declared disaster beginning January 20, 2020, and the incident period later closed on May 11, 2023, when the national emergency declaration ended. Add the statutory sixty days, and the disregarded period runs through July 10, 2023. If that entire stretch falls out of the calculation, the two-year clock on filing suit starts much later than the government assumed, and the February 2023 filing fits comfortably inside it.
Why the Court Agreed
The Court of Federal Claims sided with the taxpayer, and its reasoning is what gives this case its place in tax procedure and administration. The court held that Section 7508A(d) is self-executing. A federal disaster declaration automatically triggers the suspension period, with no further notice or Treasury guidance required to activate it. The government had pointed to a Treasury regulation capping the disregarded window at one year, but the court declined to defer to that limit, finding that Congress never wrote a one-year cap into the statute and that an agency cannot supply one on its own. Citing the Supreme Court's Loper Bright decision, the court exercised independent judgment on the meaning of the statute rather than accepting the agency's narrower reading. In practical terms, the court concluded that the IRS cannot narrow a statutory protection that Congress chose to write into the law, no matter how administratively convenient a shorter window might be. That is a meaningful statement about congressional intent, and about how far administrative guidance can stretch before it conflicts with the statute it is meant to implement.
That holding did not arrive in isolation. The Tax Court reached a similar conclusion the year before in Abdo v. Commissioner, holding that the same statutory language automatically extended the deadline to file a Tax Court petition during the pandemic, and rejecting the IRS's attempt to narrow that extension by regulation. Between Abdo and Kwong, two separate courts have now landed on the same disaster relief interpretation, which gives the reading more staying power than a single opinion would carry alone.
From Filing Deadlines to Tax Bills
Kwong was, on its face, a case about whether a lawsuit was filed on time. The implications of the Kwong ruling for taxpayers go beyond that single question. Failure-to-file penalties, failure-to-pay penalties, and underpayment interest are all calculated from a due date. If the provision pushes every relevant due date that fell between January 20, 2020, and July 10, 2023, out to that later date, then any penalty or interest computed against the original due date may have been measured against the wrong starting line. That is the bridge between a procedural ruling about court deadlines and a substantive question about how much taxpayers actually owed during the COVID-19 disaster period, and it is the part of the case drawing the most attention from tax advisors and professional advisors handling COVID tax relief measures for clients.
This is also where the limits of the decision matter. Kwong addressed specific penalties tied to specific facts, and the IRS has not adopted it as settled administrative guidance. The government has signaled its intent to appeal to the Court of Appeals for the Federal Circuit, and current IRS notices make clear that the agency has not conceded the broader argument. The National Taxpayer Advocate has urged caution, noting that the reasoning supports a stronger case for many taxpayers without guaranteeing a particular outcome for any one of them. Anyone evaluating tax compliance deadlines or limitation periods tied to this should treat the legal question as unsettled rather than resolved.
Where the Law Stands Now
For now, Kwong and Abdo stand as the two most direct statements from the courts on how the disaster relief framework in Section 7508A(d) operates. Both rejected the idea that the IRS can narrow a congressional mandate through regulation or notice. Both treated the COVID-19 disaster period as a single continuous suspension rather than a series of shorter, agency-announced windows. Whether the Federal Circuit affirms, narrows, or sends the question back for further review remains an open question, and that uncertainty is itself useful information for anyone weighing a tax position that depends on this interpretation. Related disputes may also continue to surface before the United States Tax Court, given its role in Abdo, which means tax controversy counsel have more than one appellate track to watch as this body of disaster relief legislation develops.
The more interesting question is what happens the next time a disaster strikes a single region rather than the entire country at once. Hurricanes, wildfires, and other regional disasters trigger the same statutory floor under Section 7508A(d), even though the IRS has historically handled those events through narrower, region-specific notices rather than the kind of extended window at issue in Kwong. If the broader reading in Kwong survives the appeal, federal tax deadline postponement tied to a future hurricane or wildfire could run longer than the relevant IRS notice suggests, simply because the underlying statute requires it. That possibility is one of the more significant federal tax law developments to watch as the litigation moves forward, and it carries consequences for postponed deadlines, penalty calculations, and taxpayer rights the next time a federally declared disaster is treated under federal tax law.
Get Guidance From Hall Lundstedt
Tax positions built on a contested statutory interpretation call for precision, not guesswork, especially before a deadline closes. Whether you are assessing compliance deadlines, evaluating penalty exposure tied to the COVID-19 disaster period, or monitoring the impact of ongoing litigation on a position you already took, our tax controversy team can provide the strategic advocacy and technical analysis the situation requires. Reach out to Hall Lundstedt to talk through what the Kwong decision and Section 7508A(d) mean for your specific situation.
Frequently Asked Questions
What is IRC Section 7508A(d)?
IRC Section 7508A(d) is the Internal Revenue Code provision that requires the IRS to disregard the period during a federally declared disaster, plus sixty days after the latest incident date, when deciding whether a taxpayer met a deadline. Congress added it in 2019 to make this disaster relief mandatory rather than something left entirely to the Treasury Secretary's discretion.
How does the Kwong decision interpret Section 7508A(d)?
The Court of Federal Claims held that Section 7508A(d) applies automatically once a federal disaster declaration is in effect, with no additional IRS action needed to activate it. The court also declined to follow a Treasury regulation that sought to cap the disregarded period at one year, finding that it conflicted with the statute's plain language.
What is the difference between IRS notices and Section 7508A(d) itself?
IRS notices are administrative announcements that identify specific filing or payment extensions tied to a particular disaster, and the agency has discretion over their scope and length. Section 7508A(d) is the underlying statute, and Kwong's central holding is that the statutory floor cannot be narrower than what Congress wrote, regardless of what any individual notice says.
What time period counts as the COVID disaster declaration window?
The court treated the period from January 20, 2020, through July 10, 2023, as the disregarded period for purposes of Section 7508A(d). That range runs from the date the disaster was first declared through sixty days after the COVID-19 Public Health Emergency formally ended on May 11, 2023.
Does federal disaster tax relief after Kwong apply to everyone who paid IRS penalties during the pandemic?
Not automatically. Kwong resolved a specific dispute over the timeliness of one refund suit. Its reasoning may support similar arguments for failure-to-file and failure-to-pay penalties, as well as underpayment interest tied to due dates within the disregarded period, but each taxpayer's facts, notices, and filing history still need individual review.
Is the Kwong ruling final, or could it still change?
No, it is not final. The government is expected to appeal to the Court of Appeals for the Federal Circuit, and the IRS has not adopted the decision as official policy. Taxpayers and advisors should treat the legal interpretation as unsettled while the appeal moves through the courts.
Why does a ruling about a lawsuit deadline matter for tax refunds and the July 10, 2026 date?
Because penalties and interest are both calculated from a due date, Section 7508A(d) may move that due date for obligations that fell within the disaster period. Many practitioners now calculate the relevant limitations period from July 10, 2023, which is why July 10, 2026, has become a date worth marking for taxpayers reviewing old IRS notices. If the underlying due date shifts, figures calculated against the old due date may need a second look, which is why a procedural holding in Kwong carries real weight for broader federal disaster tax relief questions.
What role does the Court of Federal Claims play in disputes like this one?
The United States Court of Federal Claims hears certain monetary claims against the federal government, including federal tax refund litigation. That jurisdiction is why a dispute over the timeliness of a refund suit, rather than a more familiar audit or collections matter, became the vehicle for interpreting Section 7508A(d).
How do federal disaster declarations affect tax deadlines generally?
Outside of Kwong, federal disaster declarations typically lead the IRS to postpone specific filing and payment deadlines for taxpayers in an affected area, usually through notices tied to a particular hurricane, wildfire, or similar event. Section 7508A(d) sits beneath those notices as the statutory floor, precisely the layer the court examined when it found the COVID-19 disaster period required a longer postponement than the IRS had administratively announced.