IRS Response to Israel’s Declaration of War: Relief to Impacted Taxpayers, But Extensions Granted to Its Enforcement Arm

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In IRS Notice 2023-71 (the “Notice”), the Internal Revenue Service (“IRS”) granted a postponement until October 7, 2024 for various time-sensitive filing and payment deadlines for taxpayers affected by the terrorist attacks in the State of Israel. The IRS regularly grants extensions of deadlines for all sorts of circumstances. Most commentators, however, have overlooked an important aspect of this Notice, namely the postponement of various other deadlines in favor of the IRS.

The Notice, an advance copy of which was issued by the IRS on October 13, grants relief under the IRS’ statutory authority in Section 7508A(a) of the Internal Revenue Code of 1986, as amended (the “Code”)[1] to postpone for up to one year certain acts under the internal revenue laws for a taxpayer determined by the Secretary to be affected by a terroristic or military action as defined in section 692(c)(2). Section 692(c)(2) defines a terroristic action as “any terroristic activity which a preponderance of the evidence indicates was directed against the United States or any of its allies.”

The Notice observed that prior to publishing a determination that an event outside the United States constitutes a terroristic action within the meaning of section 692(c)(2), the Secretary will ascertain whether the Department of State and the Department of Justice believe that a preponderance of the evidence indicates that the event resulted from terrorist activity directed against the United States or its allies. The Notice went on to state, however, that the Secretary of the Treasury determined that the terrorist acts against the State of Israel beginning on October 7, 2023 were such actions.

Affected taxpayers, for purposes of the Notice, are:

  • Any individual whose principal residence, and any business entity or sole proprietor whose principal place of business, is located in the covered area;
  • Any individual affiliated with a recognized government or philanthropic organization and who is assisting in the covered area, such as a relief worker;
  • Any individual, business entity or sole proprietor, or estate or trust whose tax return preparer or records necessary to meet a deadline for postponed acts are located in the covered area;
  • Any spouse of an affected taxpayer, solely with regard to a joint return of two married individuals; and
  • Any individual visiting the covered area who was killed, injured, or taken hostage as a result of the October 7, 2023 terrorist attacks.

The covered geographic area is the State of Israel, the West Bank or Gaza.

Any taxpayer acts that are due to be performed on or after October 7, 2023, and before October 7, 2024, are postponed until October 7, 2024. These acts include, but are not limited to:

  • Filing any return of income tax, estate tax, gift tax, generation-skipping transfer tax, excise tax (other than firearms tax), harbor maintenance tax, or employment tax;
  • Paying any income tax, estate tax, gift tax, generation-skipping transfer tax, excise tax (other than firearms tax), harbor maintenance tax, or employment tax, or any installment of those taxes;
  • Making contributions to a qualified retirement plan;
  • Filing a petition with the Tax Court;
  • Filing a claim for credit or refund of any tax; and
  • Bringing suit upon a claim for credit or refund of any tax.

The Notice also similarly extends the deadlines for the IRS to take various actions related to affected taxpayers, however. These deadlines include, but are not limited to:

  • Assessing any tax;
  • Giving or making any notice or demand for the payment of any tax, or with respect to any liability to the United States in respect of any tax;
  • Collecting by the IRS of the amount of any liability in respect of any tax; and
  • Bringing suit by the United States in respect of any liability in respect of any tax; and
  • Allowing a credit or refund of any tax.

Affected taxpayers should be aware of a few issues. First, the postponement of deadlines in their favor goes only so far. For instance, taxes due to be paid before October 7, 2023 are not subject to postponement, even if the tax returns to which those taxes relate could be postponed. Second, the IRS will have an extra year to assess taxes against taxpayers, collect liabilities for taxes, and bring lawsuits in respect of tax liability. Finally, the IRS has issued guidance over the years regarding what other deadlines can be postponed. Affected taxpayers who are unsure whether they are in this situation (for instance, whether the three-year statute of limitations on assessment of tax deficiencies or the 10-year statute of limitations on IRS collections of a liability has already run, or merely postponed for an additional year) should consult a qualified tax professional on this issue.


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[1] References in this DE Insight to Sections are to sections of the Code, unless otherwise indicated.