The New Provision for Tolling the Limitations Periods for Seeking Tax Refunds: Its History, Operation and Policy, and Suggestions for Reform
81 Pages Posted: 21 Feb 2001 Last revised: 26 Aug 2015
This Article examines a provision of the Internal Revenue Code that Congress enacted in 1998 that suspends the running of the limitations periods that apply to claims for tax refunds. The provision suspends the limitations periods when a taxpayer is "financially disabled," which is defined as being unable to manage one's financial affairs due to a sufficiently severe, medically determinable physical or mental impairment. Congress enacted this provision in response to a series of cases that culminated in a decision of the United States Supreme Court in which the Court held that courts could not equitably suspend, or "toll," the refund limitations periods under any circumstances. The Article discusses the long-standing judicial practice of tolling limitations periods as a matter of equity and shows how the contours of this practice as applied to claims against the federal government remain uncertain despite the Court's recent efforts to provide guidance. The Article also sets forth the history of, explains and illustrates the limitations periods that apply to administrative claims for tax refunds and demonstrates how an interpretation of these provisions that has gained acceptance in some courts is incorrect. After chronicling the series of cases that led Congress to enact the new Code provision, the author critically examines the new provision and provides guidance on issues of interpretation that are likely to arise. The author argues that the new provision is not well suited to the needs of the majority of taxpayers who are likely to seek its relief and contains requirements that are antithetical to its underlying purpose. The Article concludes by proposing four specific amendments to the new provision and by suggesting specific areas in which administrative guidance is necessary under the provision as it currently exists.
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