If I understand your question correctly (and please don't hesitate to
ask for clarification if I do not):
1. The taxpayer filed a tax return on 3/13/98
2. A "Trust Fund Recovery Penalty" was assessed and noticed to the
taxpayer within three years of the date the tax return was filed.
3. A timely appeal of the assessment was filed by the taxpayer.
4. The penalty was ultimately upheld by a hearing officer on 7/28/02.
5. The taxpayer would like to assert the 4 year, four month delay
between the date the return was signed and the date the penalty was
ultimately upheld, as creating a time-bar against the application of
Section 6207 of the Internal Revenue Code provides cross references.
Although you describe the penalty as having been a Section 6207
penalty, a "Trust Fund Recovery Penalty" are governed by Section 6672
- 26 USC 6672:
Pursuant to 26 USC 6672(b), the assessment by the IRS of a ?Trust Fund
Recovery Penalty? is subject to the notice requirements of 26 USC
Unfortunately for the taxpayer, the short answer to this inquiry is
no. Delay caused by the appellate process does not implicate the 3
year limitations period. The taxpayer may still appeal the matter to a
federal district court, if the taxpayer believes the ruling upholding
the penalty was in error.
The longer answer is as follows:
The ?Trust Fund Recovery Penalty? is described by the IRS through the
1. The Purpose of a Statute of Limitation
The purpose of a statutory limitations period is not to provide a
technical defense to a cause of action. They are mean to help advance
the efficient administration of justice, by keeping the courts?
dockets clear for newer cases. They also recognize the due process
issues faced by defendants in older cases, where evidence and records
may no longer be available, and where memories have faded. The
strongest ?statutes of limitation? are called ?statutes of repose?,
and they hold that once the statutory period has passed, no further
litigation is permitted.
With most other statutes of limitation, there are exceptions which
allow a case to be filed after the passage of the statutory period.
For example, if a plaintiff is below the age of majority, is mentally
disabled, or is not aware of the wrongful act until after the
statutory period has passed, a trial court may find that the statute
was ?tolled?, and that the statutory period is extended. These are not
relevant to your inquiry, as it has not been claimed that the penalty
was not asserted within the statutory period.
A ?statute of limitations? relates only to the commencement of an
action, and not to the completion of an action. When an attorney
reviews an old case, or cases with very short statutory periods (such
as whistleblower cases) he has to consider when the statutory period
runs out. As long as a case is filed on or by that day, the case is
valid. That is, if a cause of action ?accrues? on February 1, 1998,
and there is a two year statute of limitations expiring on February 1,
2000, the case is valid if it is filed on January 31 or February 1,
2000, but is time barred if it is filed on February 2. (A cause of
action is typically said to ?accrue? at the time when the wrongful act
occurs, or when the plaintiff first learned of the wrongful act. There
are exceptions to this general definition.)
Thus, a statute of limitations which bars a claim from being pursued
after a particular date does not stop a court from rendering a
decision after that date, as long as the claim is commenced (or, in
the case of the IRS, notice of the assessment is provided) before the
statutory period runs out.
2. The Three Year Statute of Limitations
The statute governing the assessment of a "Trust Fund Recovery
Penalty", as previously discussed, is 26 USC 6672. Subsection (b)(3)
of that statute provides that the governing limitations period is
defined in 26 USC 6501. Thus, in the taxpayer?s case, the three year
limitations period is defined by the Internal Revenue Code, 26 USC
6501(a): ?Except as otherwise provided in this section, the amount of
any tax imposed by this title shall be assessed within 3 years after
the return was filed (whether or not such return was filed on or after
the date prescribed)?. You can read that statute at:
In this case, the taxpayer is not disputing that the IRS met this time
limit. The taxpayer is instead objecting that more than three years
had passed between the time the tax return was filed and the time an
appeals officer upheld the tax assessment.
In this case, the delay did not result from the inaction of the IRS.
The delay resulted from the taxpayer?s pursuing its due process rights
to appeal the assessment. The taxpayer was ?on notice? of the IRS
claim throughout that period of time - that is, the taxpayer knew
about the claim, its nature, and its amount. Thus a court will not
view the taxpayer as having suffered any ?prejudice? from the delay.
(?Prejudice? is a special legal term used by courts to describe the
type of harm upon which relief may be granted. For example, an appeals
court will often uphold a lower court?s decision on the basis that,
although an error occurred, the error did not the party who is
appealing the ruling did not suffer ?prejudice?.)
3. Remedies available to the taxpayer
If the taxpayer remains convinced that the tax assessment was in
error, the taxpayer may appeal the hearing officer?s decision to a
federal district court.
Research Strategy: For this research, I used Westlaw, a subscription
research service. This service is available online on either a
subscription or pay-as-you-go basis at
For research services similar to WestLaw which are less comprehensive,
but which are free to registered users, I suggest the following:
* Findlaw (sponsored by West Group, the owner of WestLaw)
* LexisOne (sponsored by Lexis, West Group?s primary competitor)
Additional Free Resources:
* You can look up the United States Code by chapter and section on the
Cornell Law School website, at
* The Code of Federal Regulations is online on the Government Printing
Office website, at
* The IRS offers assistance with tax law questions through its
Clarification of Answer by
06 Aug 2002 21:36 PDT
With regard to notice to the taxpayer, I was speaking to the original
notice of the tax penalty as issued to the taxpayer by the IRS.
Starting on that date, the taxpayer knew that the IRS was assessing
the penalty at issue. This is not changed by the length of time it
takes to process the appeal. With that in mind...
Your statement with regard to the seven month period between the first
and second ruling may raise Due Process issues. As I read your present
comments, during that period you were relying on what you believed to
be a final disposition of the case, and that you, your accountant, and
(if applicable) your attorney were not aware that any proceedings were
continuing. (Double jeopardy is not implicated, first because this
wasn't a criminal prosecution, and second because there was only one
proceeding involved. Due process is a related legal principle, which
relates to the procedural and substantive fairness of legal
The analysis of the "due process" issue would be quite fact-specific.
The specific nature and content of any notices or correspondence,
starting with the first officer's opinion and ending with the second
officer's final disposition, could affect the outcome of that
analysis. That is, it is difficult to do more than speculate without
reading all of the relevant documentation.
(It is difficult for me to even suggest how you might phrase a
follow-up question without seeing that documentation, for fear of
steering you in the wrong direction. It is my impression, based upon
what you posted, that any follow-up question should focus on the
content of the first notice, your lack of awareness that any
proceedings continued, the surprise second ruling seven months later,
and the legal and Due Process concerns raised by this unfortunate
Due to the limitations of this service, it is important to recall that
while you can gain valuable information through this service, nothing
you read her can substitute for legal advice.
If you were to post a follow-up question, Google does not at present
allow you to choose which researcher answers your question. See:
You may wish to consider taking this question directly to a tax
attorney. The ABA presents some valuable legal resources and
information about finding a lawyer at:
I hope this is helpful,