A Tax Court ruling last week narrowed the scope of COVID-era tax refunds by limiting refund claims to deadline-related penalties only, excluding accuracy-related penalties under Internal Revenue Code Section 7508A.
In Bowen v. Commissioner, decided July 2026, the Tax Court held that only penalties arising from failures to pay or file taxes qualify for relief under Section 7508A, the federal disaster relief statute used to suspend tax deadlines during emergencies. The court distinguished these deadline-related penalties from accuracy-related penalties stemming from underreporting of income, which the court said do not qualify for the same relief.
The ruling represents a significant setback for millions of Americans who filed refund claims by the July 10, 2026 deadline, according to legal experts. Matthew D. Lee, a partner at law firm Fox Rothschild, wrote that the Bowen decision “narrows the scope of relief available in Kwong refund cases” and may result in “either smaller or no refunds” for some taxpayers who claimed accuracy-related penalties.
The backdrop for Bowen is the earlier Kwong v. United States decision, issued by the Court of Federal Claims in 2025. That court held that federal tax deadlines were automatically postponed under Section 7508A from January 20, 2020—when President Trump declared the start of the COVID-19 disaster period—through July 10, 2023, which is 60 days after President Biden ended the federal emergency declaration. The Kwong ruling meant that taxpayers had until July 10, 2026 to file claims for refunds or abatements of penalties and interest assessed during the pandemic years.
The Kwong decision was broadly interpreted by tax professionals and the IRS itself as potentially opening the door to tens of millions of taxpayers seeking relief on both deadline-related and accuracy-related penalties. But the IRS has appealed the Kwong ruling, and that appeal remains pending with the Federal Circuit, with no resolution expected until at least 2027, according to Fox Rothschild.
Despite the Bowen setback, legal experts advise taxpayers not to abandon their claims. Lee noted that “key questions about the breadth of Section 7508A relief remain unresolved” and that “the appellate process is not known for expediency.” The final answer on what penalties qualify for relief will ultimately be determined by the Courts of Appeals and possibly the Supreme Court, he added. Taxpayers who filed protective refund claims by July 10 can wait for those appellate decisions without losing their rights to a refund, provided they filed in time.
Sources
- Fox Rothschild LLP — detailed analysis of Bowen v. Commissioner ruling, Section 7508A scope, and appellate timeline
- USA TODAY — reporting on Bowen ruling, Kwong case background, and expert commentary from Matthew D. Lee
- Taxpayer Advocate Service (IRS.gov) — confirmation of July 10, 2026 refund claim deadline and eligibility
