Kwong v. United States: A Development Worth Watching — and Possibly Acting On

A recent decision from the Court of Federal Claims has drawn significant attention to filing claims for the abatement or refund of penalties and interest assessed during COVID. 

In Kwong v. United States, No. 23-267 (2025), the court analyzed the application of Section 7508A in the context of the federal COVID disaster declaration and held that Section 7508A(d) creates a mandatory, self-executing postponement of some deadlines that could affect penalties and interest assessed during that time.  

The Decision

The Court of Federal Claims held that the mandatory postponement period under Section 7508A began January 20, 2020, and ended July 10, 2023. Specifically, the court held that the taxpayer’s time for filing a refund suit under Section 6532 had been postponed from February 2023 until July 10, 2023. 

The holding might be relevant to penalties and interest because the IRS computes underpayment interest and failure-to-file/-pay penalties from the return and payment due dates. As a result, penalties and interest arguably should not have applied from January 20, 2020, through July 10, 2023, and taxpayers might have a basis to claim that such penalties and interest should be abated or refunded. 

The Current Landscape

It is important to understand what Kwong is — and what it is not. The government has not acquiesced to the decision, and on May 15, it filed an appeal. A higher court could uphold, narrow, or reverse the lower court’s holding. Until that time or unless the IRS agrees to abide by the holding in the case, claims filed under Kwong are not expected to be granted as a matter of course. 

Why Timing Matters

Adding further uncertainty is that the statute of limitations for refund claims might expire shortly — before any decision by the court of appeals. Affected taxpayers should consider whether they would like to file claims while there is still time, even though the recovery will likely be many months, or even years, away. Taxpayers that were assessed penalties and interest during that time should consider filing claims before the relevant limitations period expires. 

What a Protective Claim Accomplishes

If a refund claim is filed, the IRS might respond by issuing a notice rejecting the claim. If that happens, a taxpayer can file a protest with Appeals or pursue a refund suit in district court. If the IRS does not reject the claim, a refund suit can be filed six months after filing the refund claim.

A Measured Approach

If Kwong is upheld, the IRS should process any timely filed claims for abatement or refund once the government acquiesces to the decision or is forced to follow it. 

If the decision is reversed, claims will either be denied or not acted on. At that point, the ability to litigate in another venue would be available.