Morse: How Late Is Too Late To Challenge Old Tax Regs?

Susan Morse (Texas; Google Scholar), How Late Is Too Late to Challenge Old Tax Regs?, 184 Tax Notes Fed. 1235 (Aug. 12, 2024):

In this report, Morse examines the six-year default limitations period for claims against the federal government, which the government can invoke to defend against administrative procedure challenges and other claims in tax cases.

Conclusion
How late is too late to challenge old tax regs? Corner Post, a recent Supreme Court case, adopts a plaintiff-specific approach for ultra vires substantive challenges. But for procedural challenges, it invites the government to argue that the applicable six-year limitations period of 28 U.S.C. section 2401(a) accrues when a regulation is promulgated. This limitations period would have barred recent challenges to old regulations in cases like Valley Park Ranch and 3M — if the government had raised it. Going forward, the government should regularly raise the six-year time bar as an affirmative defense. It should be prepared for the possibility of equitable tolling counterarguments. It should also waive the time bar in some cases to allow reasonable opportunity for procedural challenges, for instance if a claim concerns a tax return filed before the six-year mark and by a taxpayer in existence when the regulation was promulgated.

This limitations period would have barred recent challenges to old regulations in cases like Valley Park Ranch and 3M — if the government had raised it. Going forward, the government should regularly raise the six-year time bar as an affirmative defense. It should be prepared for the possibility of equitable tolling counterarguments. It should also waive the time bar in some cases to allow reasonable opportunity for procedural challenges, for instance if a claim concerns a tax return filed before the six-year mark and by a taxpayer in existence when the regulation was promulgated.

Editor's Note:  If you would like to receive a daily email with links to tax posts on TaxProf Blog, email me here.