Paul L. Caron
Dean





Monday, November 21, 2022

Morse Presents APA Challenges To Old Tax Guidance And The Six-Year Default Limitations Period Today At UC-Irvine

Susan Morse (Texas; Google Scholar) presents Out of Time? APA Challenges to Old Tax Guidance and the Six-Year Default Limitations Period at UC-Irvine today as part of its Tax Policy Colloquium:

Susan-morse  The government has begun to raise the six-year limitations period under 28 U.S.C. § 2401(a) to defend against administrative procedure challenges to old tax regulations. This defense should work. The tradeoff between accuracy and repose in these cases is solved by the six-year limitations period of 28 U.S.C. § 2401(a), which begins to run when guidance issues for such administrative procedure claims. One complication in tax is that most opportunities to raise administrative procedure claims arise in deficiency or refund cases, where the pre-litigation tax procedure can be lengthy and outside the control of the plaintiff. The solution is to make appropriate equitable, administrative and perhaps legislative adjustments to ensure that the limitations period works appropriately in the tax context.

Conclusion
The puzzle presented by administrative procedure challenges to old tax guidance boils down to a classic tension in law: the tradeoff between accuracy and repose. The puzzle is solved by the six-year limitations period of 28 U.S.C. § 2401(a), which, under a case law consensus, begins to run when guidance issues for administrative procedure claims. One complication in tax is that most opportunities to raise administrative procedure claims arise in deficiency or refund cases, where the pre-litigation tax procedure is lengthy and can consume more than six years.

But the solution is not to hold the limitations period open indefinitely. That would give no weight to the value of repose. . Instead, the right solution is to keep the limitations period and temper it with appropriate adjustments to account for pre-litigation tax procedure.

Within the existing statutory law, administrative restraint can do some work. For instance, the government might have a policy of waiving the limitations period with respect to tax returns filed within six years of the issuance of a rule that a taxpayer seeks to challenge. Alternatively, Congress could amend the statute to make even clearer that the limitations period for administrative procedure claims begins to run when the final rulemaking action takes place. It could also legislatively adopt content like that proposed for an administrative restraint solution, and toll the period for challenges to tax rules based on a tax return filed within six years of promulgation that specifies the administrative procedure challenge to the regulation.

https://taxprof.typepad.com/taxprof_blog/2022/11/morse-presents-apa-challenges-to-old-tax-guidance-and-the-six-year-default-limitations-period.html

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