Two recent federal court decisions from courts with national tax jurisdiction have created potentially significant — though still uncertain — federal tax refund opportunities arising from extended tax timing rules during the COVID-19 national disaster period.
Under the Court of Federal Claims’ interpretation of Internal Revenue Code Section 7508A(d) in Kwong v. United States, many federal tax deadlines may have been automatically extended as a matter of law during the entirety of the COVID-19 disaster period, plus an additional 60 days. In addition to potentially reopening refund opportunities previously believed to be closed, the developing case law may create possible claims involving interest, penalties, and previously time-barred refund amounts. For some taxpayers, the potential opportunity could involve tens of millions of dollars; for others, the impact may be more limited but still meaningful.
The Kwong decision followed a similar holding by the United States Tax Court in Abdo v. Commissioner regarding the mandatory nature of the statutory extension under Section 7508A(d). Although the government has appealed Kwong and continues to challenge broader applications of these rules, decisions from two national tax courts have created potential refund opportunities that taxpayers should evaluate while the legal landscape continues to develop.
Avoid Costly Refund Claims and Litigation: Preserve Rights Through a Strategic Protective Refund Claim Approach
With time rapidly running out before the July 10, 2026 deadline, the critical question for many businesses is not simply whether a theoretical refund opportunity exists — but how to preserve potential rights in a disciplined, cost-effective manner while courts continue to address these issues.
At this stage, we generally recommend against filing expensive, resource-intensive traditional refund claims based solely on this developing authority. Instead, as discussed in greater detail in our linked analysis, the more prudent strategy for many taxpayers may be filing carefully tailored protective refund claims.
Protective refund claims are specifically designed to preserve statutory filing deadlines and taxpayer rights while avoiding the immediate costs, administrative burdens, and premature controversy associated with pursuing active refund disputes before the law is settled.
A timely and properly drafted protective refund claim provides an efficient mechanism to preserve the ability to later perfect and pursue the claim if additional courts ultimately confirm a broader application of Section 7508A(d). For many organizations, this approach preserves flexibility and optionality while allowing other taxpayers and pending litigation to further develop the governing law.
Remaining strategically positioned is especially important given continuing developments, including the pending Kwong appeal and the IRS Action on Decision addressing Abdo released on May 15, 2026. A protective claim strategy allows taxpayers to monitor these judicial and administrative developments while preserving potential refund rights.
Importantly, the protective claim approach may also preserve flexibility regarding future litigation strategy — including the potential ability to select among available federal court forums depending on how precedent evolves.
Key Takeaway
Businesses should consider evaluating whether protective refund claims should be filed before July 10, 2026, to preserve potential refund opportunities arising from the COVID-19 disaster extension rules under IRC Section 7508A(d), which remain subject to ongoing judicial review.
For many taxpayers, preparing and filing a protective refund claim may require only a limited investment of time — often approximately two to five hours of focused analysis by experienced tax advisors — while preserving potentially significant rights.
At this stage, most taxpayers are best served by preserving their options through carefully drafted protective claims while monitoring developments from the sidelines, rather than immediately pursuing substantive refund claims or litigation based on a legal position that the IRS continues to vigorously dispute.
Learn more about the evolving Section 7508A(d) litigation, the advantages of protective refund claims, and strategic considerations for preserving potential refund rights while managing cost and controversy risk.