Last Updated 5 months ago

A new federal court ruling on disaster-related tax extensions has important, if quiet, implications for Americans who relied on the post-October 7th relief.

By now, most of our clients in Israel are familiar with IRS Notice 2023-71 and the relief it brought after October 7th – the extended deadlines, the FBAR postponement, the long-overdue breathing room during an incredibly difficult time. We’ve fielded countless calls and emails about it, and we’ve done our best to keep you in the loop as the IRS has continued to issue follow-up notices.

Now, a recent decision from the U.S. Court of Federal Claims has put a spotlight on the very statute that authorized all that relief in the first place – Internal Revenue Code Section 7508A*. 

The case is Terry W. Kwong v. United States, decided on November 25, 2025. And while Mr. Kwong’s situation involved the COVID-19 pandemic rather than the war in Israel, the court’s reading of Section 7508A could matter quite a bit for our clients here.

Let’s break down what happened, why it matters, and what (if anything) you need to do about it.

Key Takeaways

• The Kwong decision focused on how courts interpret disaster-related tax deadline extensions under IRC Section 7508A.
• The ruling may support taxpayers who relied on IRS relief connected to the post-October 7th situation in Israel.
• The decision does not automatically extend published filing deadlines, but it may affect certain refund claims or penalty-related timelines.

The Background, in Plain English

Mr. Kwong is a California taxpayer who sued the IRS for a refund of penalties from several old tax years. The IRS argued he waited too long – that the two-year clock to sue had already run out by the time he filed in court. Mr. Kwong’s response: The COVID-19 disaster declaration, combined with Section 7508A, postponed his deadline.

The court agreed with Mr. Kwong. The judge held that under the version of Section 7508A in effect at the time, the automatic (or “mandatory”) extension ran from the start of the disaster declaration all the way until 60 days after the disaster declaration ended. For COVID, that meant the postponement ran from January 20, 2020, through July 10, 2023 – a span of more than three years.

Along the way, the court rejected an IRS regulation that sought to cap the mandatory extension at one year. Citing the Supreme Court’s recent Loper Bright decision (which scaled back the deference courts used to give the IRS on questions of statutory interpretation), the judge said the plain language of the statute controls – not the IRS’s preferred reading.

Why This Matters for Israel-Affected Taxpayers

You may be thinking, “Great for Mr. Kwong – but what does this have to do with me?” Fair question. Here’s where it gets interesting.

Section 7508A is the same statute that authorized your Israel relief. Notice 2023-71 – and every follow-up notice the IRS has issued since – rests on Section 7508A. The Kwong court’s willingness to read this statute generously, in favor of taxpayers, is good news for anyone who has relied on its protections, war-affected clients very much included.

The court pushed back when the IRS tried to narrow taxpayer relief. The regulation the court rejected was an IRS attempt to limit the duration of an automatic extension. The judge said, in effect, “That’s not your call – the statute means what it says.” That same principle protects taxpayers in Israel just as it did Mr. Kwong in California.

The two-year clock for suing to recover a refund can be postponed. This is probably the most practical takeaway. Ordinarily, once the IRS denies your refund claim, you have two years to file suit in court. The Kwong court confirmed that Section 7508A can push back that two-year clock. For clients in Israel with refund claims tied to penalties, withholding issues, or other tax matters during the war years, your window may be longer than you’d otherwise think.

One Quick Bit of Nuance

It’s worth noting that Congress has tweaked the part of the statute the court was interpreting a couple of times since 2019, so the very generous reading the judge applied to the COVID timeline wouldn’t necessarily stretch quite that far for every future disaster. 

The good news is that the Israel relief comes through a different – and discretionary – part of the same statute, which is exactly why the IRS was able to give us the October 2024 deadline (and the further extensions that followed). That authority isn’t on the table here.

What Kwong really shifts is the mood music. Courts are increasingly willing to read these statutes as written, rather than the way the IRS would prefer to read them. For taxpayers – including ours in Israel – that’s a quiet win.

The Bottom Line

If you’re a U.S. citizen in Israel who relied on the post-October 7th tax extensions, you don’t need to do anything different today. Your relief is intact. But the Kwong decision is a quietly important data point in the broader story of how courts treat disaster-related tax relief – and it generally cuts in favor of taxpayers, not the IRS.

As always, if you have specific questions about your own situation – a deadline you’re worried about, a penalty you’d like to challenge, or just a fresh set of eyes on a confusing IRS notice – please reach out to your PSA contact. We’re here to help, and we’ll keep you posted as this area continues to develop.

*26 U.S. Code § 7508A – Authority to postpone certain deadlines by reason of Federally declared disaster, significant fire, or terroristic or military actions. (n.d.). LII / Legal Information Institute. https://www.law.cornell.edu/uscode/text/26/7508A