Stephanie Murrin v. Commissioner of Internal Revenue

This case presents a direct and acknowledged conflict over an important question of federal tax law. Under the Internal Revenue Code (Code), the Internal Revenue Service (IRS) typically has three years from the date a tax return is filed to assess tax. 26 U.S.C. § 6501(a). But Congress created an exception to that three-year deadline for “false or fraudulent return[s] with the intent to evade tax.” 26 U.S.C. § 6501(c)(1). If that exception applies, the IRS can seek unpaid tax at any time. In the decision below, the Third Circuit held that this exception applies broadly—and the government faces no enforcement deadline at all—if a third-party tax return preparer (unbeknownst to the taxpayer herself) intentionally prepared a “false or fraudulent return with intent to evade tax.” Under this rule, it makes no difference if a taxpayer is entirely innocent and has no knowledge about, let alone any participation in, any wrongdoing. In so holding, the Third Circuit created a direct split with the Federal Circuit, which held that § 6501(c)(1) applies only when the taxpayer herself acted with “intent to evade tax.” The decision below thus leaves the meaning of a central limitations period of the Code dependent on the forum in which a taxpayer litigates. The question presented is: Whether, under 26 U.S.C. § 6501(c)(1), the IRS may assess tax beyond the Code’s three-year limitations period based solely on the fraudulent intent of a third-party, even when the taxpayer herself neither intended to evade tax nor knew of any wrongdoing.