HR-5346-119
Received in the Senate and Read twice and referred to the Committee on Finance.
Sponsored by Glenn Grothman (R-WI)
What it does
This bill would amend the timing requirement for IRS penalty approval under Section 6751(b)(1) of the tax code. It would require a supervisor to personally approve, in writing, the initial determination of a penalty before any written communication about that penalty—including a proposed adjustment—is sent to the taxpayer, rather than at a later point in the process. It also defines "immediate supervisor" as the person to whom the IRS employee making the determination directly reports.
Who benefits
Taxpayers under IRS examination, particularly individuals and small businesses facing proposed penalties, who would gain a clearer procedural safeguard against penalties assessed without proper supervisory review. Tax practitioners and attorneys who litigate penalty disputes would benefit from a bright-line rule reducing litigation over when approval must occur, an issue that has produced conflicting circuit court rulings in recent years.
Who is hurt
The IRS would bear added administrative burden, needing to obtain supervisory sign-off earlier in the examination process, which could slow issuance of some penalty notices. IRS supervisors and examiners would face additional documentation requirements. Taxpayers with clearly warranted penalties could see delayed enforcement, and IRS revenue collection timelines could be modestly affected.
Supporters argue
Supporters argue that requiring supervisory approval before the first written communication—rather than at some later, ambiguous point—closes a loophole that has let some penalties proceed with minimal oversight, since courts have split on when in the process approval under current law must occur. They contend this creates a clear, enforceable checkpoint that protects taxpayers from arbitrarily imposed penalties and reduces costly litigation over procedural technicalities.
Opponents argue
Opponents argue that moving the approval deadline earlier in the process could slow the IRS's ability to timely notify taxpayers of penalties, adding administrative friction to an already resource-constrained agency. They contend that supervisory approval requirements, however well-intentioned, risk becoming another procedural hurdle that delays enforcement and gives noncompliant taxpayers additional grounds to challenge otherwise valid penalties on technical grounds.