Stephanie Murrin underpaid her taxes from 1993 to 1999. It wasn’t her fault: she hired a tax preparer, Duane Howell, who aimed to defraud the IRS by creating phony paper losses on tax shelter partnerships for his clients. He got caught, was indicted in 2006, and pleaded guilty to federal charges in 2007. Murrin, being innocent of the scheme, could reasonably have assumed that the IRS wouldn’t go after her, given that the usual statute of limitations is three years. But in 2019 — two decades after the last underpayment, and 13 years after Howell’s indictment — the IRS notified Murrin that it was assessing her with a tax deficiency for $65,318 plus interest and $13,064 in penalties. She challenged the late notice in Tax Court. I don’t know what happened to Howell, but he was 72 years old when he pleaded guilty 18 years ago, and he did this for a bunch of clients; one doubts that Murrin has any recourse against him or his estate at this late date.

But wait! The statute of limitations allows the IRS to go on to the end of time when collecting taxes due from “a false or fraudulent return with the intent to evade tax.” Ah, but whose intent? Murrin’s lawyers argued that she had no intent to defraud the tax man — the IRS didn’t dispute this — but the IRS countered that Howell pleaded guilty to tax fraud, so the statute of limitations doesn’t run until the sun burns out and the Earth is a frozen rock hurtling into a black hole of eternal nothingness (perhaps not exactly a direct quote from the government’s brief).

Monday, the Third Circuit sided with the IRS, in a decision by a unanimous panel of a Biden appointee (Tamika Montgomery-Reeves), a Trump appointee (Stephanos Bibas), and an Obama appointee (Cheryl Ann Krause). This was not a total surprise. The Tax Court had reached a similar conclusion in 2016 regarding another Howell client represented by the same attorney, and the government cited the Supreme Court’s unanimous decision in Bartenwerfer v. Buckley (2023), which similarly construed a provision of the Bankruptcy Code that used the passive voice as authorizing recovery from an innocent recipient of fraudulent proceeds. On the other hand, the Federal Circuit reached the opposite conclusion in 2015, so the case is well-positioned for a Supreme Court resolution that will doubtless draw the ire of Justice Neil Gorsuch at an endless government bureaucratic quest that would make Inspector Javert proud.

The Third Circuit’s opinion may well be wrong, but it’s not crazy; blame may lie with the 1918 Congress for writing this provision in this way, and it surely lies with the IRS for relentlessly pursuing repayment — with interest! — from innocent taxpayers for returns now dating back over 30 years.