Further on Murrin and Allen and the Unlimited Statute of Limitations for Fraud on the Return (4/30/26)

I read earlier this week an excellent article on Murrin v. Commissioner, 158 F.4th 527 (3d Cir. 2025), here, cert petition pending (see here). Bryan Camp, The New Forever Rule for Record Retention (Tax Notes March 3/25/26), here. Professor Camp is concerned, as he was in filing an amicus brief in Murrin, with the potential application to innocent taxpayers of § 6201(c)(1)’s unlimited statute of limitations for a “false or fraudulent return with the intent to evade tax.” Murrin held that the taxpayer’s fraud is not required and that a return preparer’s fraud would suffice to apply the unlimited statute of limitations for fraud. For further on Murrin, see my post Third Circuit Holds Taxpayer Fraud is not Required for 6501(c)(1) Unlimited Statute of Limitations, Creating Conflict (Federal Tax Procedure Blog 8/18/25; 10/17/25).

In an alarmist mode, Professor Camp concludes his article by stating that, unless the problem of § 6201(c)(1) applying to innocent taxpayers is fixed, “I think we must all advise our clients to keep their records . . . forever.” (Emphasis supplied.) What does forever mean in this context? That's a quibble. Professor Camp is not just content to provide that bottom line from Murrin but repeats his arguments in his amicus brief as to error in Murrin and the predicate tax court opinion in Allen v. Commissioner, 128 T.C. 37 (2007), here.

I encourage those interested in the issue (which I call the Allen issue) to read Professor Camp’s article. I have not recently stepped through the legislative and statutory history he discusses in support of his claims, but my recollection is that I was not then sure that they support his claims. In any event, I am sure that for a long period of time since the early tax law, practitioners, including me, assumed that § 6201(c)(1) required taxpayer fraud. Allen appeared out of the blue, so to speak. But now that, in Justice Kagan's words “we are all textualists now,” if we focus on the text of § 6201(c)(1), there is no textual reading that would limit its scope to taxpayer fraud if the fraud is on the return. In other words, at best regarding Professor Camp's claims, the actual text is ambiguous as to whether the text of § 6201(c)(1) requires the taxpayer's fraud.

Further, on the purpose of § 6201(c)(1), I do not conceive it is as a punishment provision but a recognition that fraud on the return makes discovery by the IRS more difficult. After all, the consequence of the unlimited statute of limitations is that the taxpayer pays the tax the taxpayer owed ab initio. True, the taxpayer may have to pay interest, but tax and interest are not penalties. The taxpayer Professor Camp is concerned about is the truly innocent taxpayer relying on a fraudulent preparer; for such a taxpayer there will be no penalty because (i) § 6662 civil penalty which does not apply with taxpayer reasonable cause (unless, for some § 6662 civil penalties, the reasonable cause exception does not apply which is not likely in an innocent taxpayer context) and (ii) § 6663 civil fraud penalty does not apply unless taxpayer fraud is involved. So, from that perspective, the truly innocent taxpayer suffers no penalty with respect to the fraud on the return; rather, he would just pay the tax and interest that are in the helpful metaphor, his dues for a civilized society.

That’s all I have on the merits of Murrin and Allen. Just a few more comments:

1. The TAS Act bill, here, at § 1003, titled “Limitation period not extended for victims of preparer fraud,’ may fix the problem by making § 6501(c)(1) read as follows (additions in red):

(1) False return
In the case of a false or fraudulent return with the intent by the taxpayer to evade tax, the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time.

The effective date for this amendment, if passed, is for “assessments made or proceedings begun after the date of enactment of this Act.”

In this regard, the SG has twice requested and received extensions on the date to file a response to the petition for certiorari. One might speculate that the SG is waiting to see what, if anything, happens to the TAS Act bill or, perhaps, even considering changing the Government's interpretation of § 6501(c)(1).

2. It is at least possible that this legislative fix may not solve the problem because of the textual reading of § 6501(c)(2) which reads:

(2) Willful attempt to evade tax
In case of a willful attempt in any manner to defeat or evade tax imposed by this title (other than tax imposed by subtitle A or B), the tax may be assessed, or a proceeding in court for the collection of such tax may be begun without assessment, at any time.

As with § 6501(c)(1), § 6501(c)(2) is agnostic as to whose attempt is involved. Would subsections (1) and (2) be in conflict if TAS Act bill passes? How should courts resolve the conflict?

3. If there is neither a legislative nor judicial fix to the Allen issue, I quibble with Professor Camp’s blanket claim that “we must all advise our clients to keep their records . . . forever.” While fraudulent return preparers with innocent taxpayers may not be rare, neither is it common. The inference I draw from my experience and reading the cases is that it is quite uncommon given the number of tax returns that are filed. Nor is it likely that the IRS would expend the resources to investigate taxpayers’ returns outside the normal statute of limitations, particularly given the heavy burden of proving fraud required for the unlimited statute of limitations. I think the advice we should give taxpayers is: keep records for some time (forever is a bit capacious, although perhaps hyperbole to make his point) beyond the normal 3 or 6 year periods if fraud is on the return and they have any reason to believe that they or the preparer committed fraud.

4. A thought experiment: Consider how this particular statutory interpretation issue is implicated by Loper Bright? Of course, the IRS’s position has not been adopted in some high-level IRS “rule” such as a regulation (that in the Chevron era may have qualified for Chevron deference)? But what is clear is that, on the interpretive issue, the statute text is at best from Professor Camp’s perspective ambiguous (hence his need to root around in the legislative and statutory history). Remember Loper Bright’s message that a court can always interpret out ambiguity.” Does Loper Bright only demand no ambiguity when an agency rule (regulation or subregulatory guidance) is involved, thus permitting ambiguity in other cases such as Murrin. In any event, what happens if there is real ambiguity where the judge cannot honestly say that the text Congress enacted provides the best interpretation? See Interesting points from ABA Tax Online Presentation on Loper Bright (Federal Tax Procedure Blog 4/29/26), here.

 5. The problem I have with the proposed amendment to § 6501(c)(1) is that the amendment would relieve not only innocent taxpayers of the type in Murrin and Allen and with which Professor Camp is concerned but also not-so-innocent taxpayers who knew or should have known that the tax benefits they claimed were too good to be true. The prototypical not-so-innocent taxpayers I address here are the taxpayers investing in the Son-of-Boss shelters such as BLIPS avoiding millions and likely billions of taxes due. Promoters of those shelters were criminally prosecuted and convicted, establishing that there was fraud on the taxpayers’ returns. In virtually all of the Son-of-Boss shelters that I am aware of, because of the large tax dollars involved and the taxpayers’ wealth, each had separate independent legal opinions that I suspect advised in more polite language that the tax benefits were bullshit but that the taxpayer may play the audit lottery with impunity other than having to pay the tax owed and interest and perhaps a civil penalty if caught in the applicable statute of limitations (which would have been 3 or 6 years). Those taxpayers are not so innocent in the Murrin and Allen sense and the sense that concerns Professor Camp. My suggestion is to limit the amendment to § 6501(c)(1) to taxpayers whose tax liabilities do not exceed $1 million. Not many, if any, taxpayers with liabilities they evaded or avoided would really be innocent in the sense I mean it here.

6. At fn. 8, in citing Allen, Professor Camp says cryptically: “One of several ironies is that the Allen opinion was authored by then-Judge Diane Kroupa.” The back story for that cryptic comment is that Judge Kroupa pled to a tax-related conspiracy count. See Former Tax Court Judge Kroupa Enters Plea to Conspiracy Count (10/21/16; 10/25/16), here. That criminal conviction has nothing to do with the merits of Allen or the claims Professor Camp makes.

7. It is interesting that, after filing an amicus brief in Murrin, rather than filing an amicus brief in support of the Murrin petition for cert, Professor Camp publishes an article during the pendency of the Murrin cert petition. This reminds me of a somewhat analogous situation I faced while with DOJ Tax Appellate in the early 1970s. I handled Diamond v. Commissioner, 492 F.2d 286 (7th Cir. 1974) (yes, the infamous Sol Diamond case). One practitioner (formerly with DOJ Tax Appellate) complained to the Chief of the Section that my brief was wrong (also poorly written, and whatever other pejoratives he could muster up). He could have filed an amicus brief (his request would surely have been granted). Instead, he chose to write an article which he arranged to have published in that Tax Law Review on an expedited basis (after briefing and before the Diamond oral argument), arguing that the Government’s position was wrong. He got the effect of an amicus brief without the Government having the opportunity to respond (I’ve never heard of a party on appeal getting permission to file a brief in response to an article). At oral argument, I advised the court of the article and said the article was wrong for reasons I would be pleased to address in a written submission (aka brief) to the Court, but that otherwise I did not feel it appropriate to address the article at oral argument. The point is that an article (such as Professor Camp’s article) might serve as well as an amicus brief at least in some cases.

8. I recommend the two articles in Professor Camp's footnote 52:

Jesse Cross, “Where Is Statutory Law,” 108 Cornell L. Rev. 1041 (2023), here; and George Yin, “How Codification of the Tax Statutes and the Emergence of the Taff of the Joint Committee on Taxation Helped Change the Nature of the Legislative Process,” 71 Tax Law Rev. 723 (2018), here.