The foundational rule of tax administration is repose: typically, the Internal Revenue Service (IRS) must assess tax within three years of a return’s filing under Internal Revenue Code (IRC) Section 6501(a). However, a recent precedential decision by the Third Circuit Court of Appeals in Murrin v. Commissioner, 158 F.4th 527 (3d Cir. 2025), has deepened a critical circuit split regarding the fraud exception to this rule.

On February 17, 2026, the taxpayer filed a Petition for a Writ of Certiorari with the U.S. Supreme Court. The petition asks the Court to decide a binary but high-stakes question: Does the "false or fraudulent return" exception to the statute of limitations apply when the fraud is committed solely by a third-party preparer without the taxpayer’s knowledge or intent?

This article analyzes the Third Circuit’s decision, the conflicting precedent from the Federal Circuit in BASR Partnership, and the arguments presented in the taxpayer’s petition for review.

The Murrin Decision: Third-Party Intent Tolls the Statute Indefinitely

In Murrin, the Third Circuit affirmed a Tax Court decision holding that the IRS could assess taxes and penalties regarding returns filed over two decades ago. The facts were stipulated and undisputed: The taxpayer, Stephanie Murrin, hired a tax preparer, Duane Howell, for tax years 1993 through 1999. Howell placed false entries on the returns with the intent to evade tax. Murrin, however, signed the returns in good faith, unaware of the fraud, and had no intent to evade tax.

The IRS issued a Notice of Deficiency in 2019—long past the standard three-year assessment statute expiration date (ASED). The IRS relied on IRC § 6501(c)(1), which permits assessment "at any time" in "the case of a false or fraudulent return with the intent to evade tax".

The Third Circuit held that § 6501(c)(1) is "agnostic" regarding who possesses the intent to evade. In a textualist analysis, the court reasoned:

Passive Voice Construction: The court relied heavily on the Supreme Court’s interpretation of bankruptcy statutes in Bartenwerfer v. Buckley, 598 U.S. 69 (2023), noting that the passive voice in § 6501(c)(1) ("false or fraudulent return with the intent to evade tax") focuses on the event (the filing of the return) rather than the actor.
No "Taxpayer" Limitation: The court observed that while § 6501(a) refers to the return filed by "the taxpayer," subsection (c)(1) omits the word "taxpayer." The court inferred that if Congress intended to limit the exception to taxpayer fraud, it would have done so explicitly, as it did in the civil fraud penalty statute (§ 6663(c)) and the reasonable cause exception (§ 6664(c)(1)).
Rejection of Federal Circuit Precedent: The Third Circuit explicitly "part[ed] ways" with the Federal Circuit, creating a formal circuit split.

The Circuit Split: BASR Partnership v. United States

The Murrin decision stands in direct conflict with BASR Partnership v. United States, 795 F.3d 1338 (Fed. Cir. 2015). In BASR, the Federal Circuit reviewed nearly identical statutory language in the context of a fraudulent tax shelter promoted by an attorney, where the taxpayer partners were innocent of the fraud.

The Federal Circuit held that § 6501(c)(1) suspends the statute of limitations only when the taxpayer acts with the requisite intent to evade tax. Their reasoning differed fundamentally from the Third Circuit:

Statutory Context: The Federal Circuit emphasized that § 6501(c)(1) must be read in pari materia with other fraud provisions. For instance, IRC § 7454(a) places the burden of proof on the government to show the "petitioner" (taxpayer) is guilty of fraud, and IRC § 6663 imposes fraud penalties based on the taxpayer’s conduct.
Historical Precedent: The court traced the language back to the Revenue Act of 1918, where the fraud penalty and the limitations exception were housed in the same section, linking the suspension of the statute to the specific intent of the taxpayer to evade the tax they owed.

The Murrin court rejected this analysis, siding instead with the BASR dissent, arguing that the legislative history and statutory context did not overcome the plain text of the statute.

Analysis of the Petition for Writ of Certiorari

The taxpayer’s petition to the Supreme Court outlines several compelling reasons for granting review, focusing on statutory construction and the administration of justice.

1. The "Geography" of Justice

The petition highlights an "intolerable" disparity caused by the split. Currently, the application of the statute of limitations depends entirely on the forum in which a taxpayer litigates:

Court of Federal Claims: If a taxpayer can afford to pay the disputed tax and sue for a refund, the case is appealed to the Federal Circuit, where BASR Partnership controls. Under BASR, an innocent taxpayer is protected by the three-year statute of limitations even if their preparer committed fraud.
Tax Court: If a taxpayer cannot pay in advance and petitions the Tax Court (as is common for individual taxpayers), the case is appealed to the regional circuit. In the Third Circuit (and potentially others following Murrin), the innocent taxpayer faces indefinite liability.

The petition argues that the meaning of a federal statute should not depend on a taxpayer’s net worth or ability to prepay a deficiency.

2. Destruction of Repose

The petition argues that the Third Circuit’s decision converts a narrow fraud exception into a "regime of perpetual liability". By removing the "taxpayer intent" requirement, the IRS can audit returns from decades ago (in this case, nearly 30 years). The petition notes that while Murrin’s tax deficiency was approximately $65,000, the accrued interest exceeds $250,000—a financial catastrophe triggered by the fraud of a third party the taxpayer did not control or know was acting illegally.

3. Statutory Consistency

The petitioner argues that the phrase "intent to evade tax" in § 6501(c)(1) is not surplusage. It serves as the "statutory condition that distinguishes ordinary errors... from conduct that justifies withdrawal of repose". The petition contends that because the tax being evaded is the taxpayer’s, and the return is the taxpayer’s, the intent must naturally be the taxpayer’s. They argue the Third Circuit’s reliance on Bartenwerfer is misplaced because tax returns are fundamentally different from dischargeability of debt in bankruptcy.

Implications for Tax Practitioners

For CPAs and EAs, the Murrin decision and the pending Supreme Court petition carry significant practice management implications:

Vetting Third Parties: Practitioners must be acutely aware that a client’s prior association with a fraudulent preparer or promoter could reopen closed years indefinitely, even if the client was a victim of that professional.
Document Retention: The standard advice to retain records for three to seven years may be insufficient if the IRS alleges third-party fraud. If Murrin stands, the burden of proof effectively shifts to the taxpayer to defend returns from decades past, often without surviving records.
Due Diligence: When assuming new clients, EAs and CPAs should inquire about the history of preparers used in prior years. If a client utilized a preparer known for aggressive or fraudulent positions (like the preparer in Murrin who was criminally convicted), the statute of limitations for those years may technically remain open in certain jurisdictions.

Conclusion

The Supreme Court’s decision to grant or deny certiorari in Murrin will determine whether the IRS possesses the power to assess tax "at any time" against innocent taxpayers due to the malfeasance of their accountants. As the petition notes, leaving this split unresolved allows the IRS to pursue "innocent parties with sudden (and crushing) debt—all while excusing government delay". Until this is resolved, the BASR protection remains available only to those who can afford to litigate in the Court of Federal Claims.

Legal Citations:

Murrin v. Commissioner, 158 F.4th 527 (3d Cir. 2025).
BASR P’ship v. United States, 795 F.3d 1338 (Fed. Cir. 2015).
Bartenwerfer v. Buckley, 598 U.S. 69 (2023).
Allen v. Commissioner, 128 T.C. 37 (2007).
IRC § 6501(a), (c)(1); § 6663; § 7454(a).

Prepared with assistance from NotebookLM.