S-5143-119
Read twice and referred to the Committee on Finance.
Sponsored by Michael Bennet (D-CO)
What it does
This bill would amend IRS procedural rules requiring supervisory approval before certain penalties or "disallowance periods" (time bans on claiming credits like the Child Tax Credit, education credits, or Earned Income Tax Credit after prior improper claims) take effect. It would require that approval come from either the immediate supervisor or the IRS Office of Servicewide Penalties, and that approval be obtained before any notice giving the taxpayer appeal rights is sent. It also requires the Treasury Secretary to publish an annual public report on penalties assessed, broken down by IRS unit and by stage of the review process.
Who benefits
Taxpayers facing IRS penalties or credit disallowance periods, who would gain a clearer, standardized approval process and more transparency through the required annual reporting; tax practitioners and advocacy groups who litigate procedural penalty defenses under existing Section 6751(b) case law; and researchers or watchdog groups who would gain access to detailed penalty data.
Who is hurt
IRS staff and units responsible for penalty and disallowance determinations, who would face additional administrative steps and compliance burdens; the IRS budget, which would bear costs of implementing new approval workflows, electronic forms, and annual reporting; and potentially taxpayers who might experience processing delays if approval requirements slow enforcement actions.
Supporters argue
Supporters argue that current supervisory approval requirements under Section 6751(b) have generated years of litigation over ambiguous timing and documentation standards, and that codifying a clear electronic approval process and deadline would reduce disputes and protect taxpayers from improperly approved penalties. They contend the annual public reporting requirement would increase accountability by showing how penalties are determined and reviewed at each IRS unit, potentially reducing arbitrary or inconsistent enforcement.
Opponents argue
Opponents argue that adding more rigid, form-based approval requirements before disallowance periods take effect could slow the IRS's ability to prevent erroneous or fraudulent credit claims, particularly refundable credits like the Earned Income Tax Credit that are already vulnerable to improper payments. They contend the new reporting mandate would impose significant administrative costs on an already resource-strained IRS without a clear showing that current supervisory approval practices are producing unfair outcomes at scale.
Constitutional context
This bill governs internal IRS administrative procedure rather than the scope of taxing power itself, so it does not implicate the Origination Clause or apportionment questions; its closest constitutional touchpoint is due process protections for taxpayers facing penalties, an area Congress may regulate through ordinary procedural statutes without a specific controlling Supreme Court case.
Checks and balances
Congress would set statutory procedural requirements constraining how the executive branch (IRS) assesses penalties, with courts continuing to review IRS compliance with these requirements in tax litigation.
Historical precedent
Section 6751(b)'s supervisory approval requirement was itself enacted in 1998 as part of IRS reform legislation, and this bill amends that existing framework rather than creating an entirely new mechanism.