Bill Summary
The "IRS Accountability and Taxpayer Protection Act" aims to enhance transparency and accountability in the assessment of penalties by the Internal Revenue Service (IRS). Key provisions of the legislation include:
1. **Approval Requirement for Penalties**: Before any penalty can be assessed against a taxpayer or any disallowance period can take effect, the initial decision must receive written approval from the immediate supervisor of the individual who made the determination. This approval must occur before any notice is sent to the taxpayer regarding the penalty.
2. **Definition of Initial Determination**: The act defines what constitutes an "initial determination," clarifying that it refers to the first written notice to a taxpayer indicating that a specific penalty or disallowance period applies based on the taxpayer's unique circumstances.
3. **Clarification of Disallowance Periods**: The act establishes clear definitions for disallowance periods related to specific tax credits and stipulates that certain automatic calculations of these periods do not require the same approval process.
4. **Reporting Requirements**: The Secretary of the Treasury is mandated to report publicly on all penalties assessed by the IRS annually, including detailed information on the penalties, the units of the IRS involved, and the progression of the assessment and review processes.
Overall, this legislation seeks to protect taxpayers by ensuring that the imposition of penalties is closely monitored and justified through proper supervisory oversight.
Possible Impacts
Here are three examples of how the "IRS Accountability and Taxpayer Protection Act" could affect people:
1. **Increased Taxpayer Protection**: The requirement for penalties to be personally approved in writing by a supervisor before being assessed offers a safeguard for taxpayers. This could reduce the likelihood of unjust penalties being imposed due to errors or misjudgments by IRS agents, thereby providing a greater sense of fairness and accountability in the tax enforcement process.
2. **Clarity and Transparency**: By defining the term "initial determination" and specifying what constitutes a penalty or disallowance period, the legislation aims to make the processes clearer for taxpayers. Individuals will have a better understanding of when and how penalties may be applied, which can help them make informed decisions about their tax obligations and responses to IRS communications.
3. **Annual Reporting and Accountability**: The requirement for the Secretary of the Treasury to report publicly on penalties assessed by the IRS can enhance transparency and accountability in tax administration. Taxpayers and policy advocates can access data regarding how penalties are applied and reviewed, allowing for greater scrutiny of IRS practices and potentially leading to reforms that benefit taxpayers in the long term.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 2358 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 2358
To amend the Internal Revenue Code of 1986 to modify the procedural
rules for penalties.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 21, 2025
Mr. Scott of South Carolina (for himself, Ms. Lummis, Mr. Tillis, Mr.
Grassley, Mr. Barrasso, Mr. Crapo, and Mr. Risch) introduced the
following bill; which was read twice and referred to the Committee on
Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to modify the procedural
rules for penalties.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``IRS Accountability and Taxpayer
Protection Act''.
SEC. 2. MODIFICATION OF PROCEDURAL REQUIREMENTS FOR PENALTIES AND
DISALLOWANCE PERIODS.
(a) In General.--Section 6751(b) of the Internal Revenue Code of
1986 is amended--
(1) by striking paragraph (1) and inserting the following:
``(1) In general.--No penalty under this title shall be
assessed, and no disallowance period shall take effect,
unless--
``(A) the initial determination to apply such
penalty or disallowance period, as applicable, is
personally approved (in writing) by the immediate
supervisor of the individual making such determination,
and
``(B) the approval described in subparagraph (A) is
obtained on or before the date any notice is sent to
the taxpayer regarding the application of such penalty
or disallowance period.'', and
(2) by adding at the end the following:
``(3) Initial determination.--
``(A) In general.--For purposes of this subsection,
the term `initial determination' means the first
determination, provided in a written notice to a
taxpayer, that, based on specific facts and
circumstances with respect to such taxpayer--
``(i) a specific penalty applies to such
taxpayer for a specific amount, or
``(ii) a disallowance period applies to
such taxpayer for a specific period.
``(B) Requests or inquiries.--No request or inquiry
made by the Secretary shall be deemed to be an initial
determination unless such request or inquiry provides
the taxpayer with an offer to agree to a specific
penalty for a specific amount (with the exception of
any penalty offered under a settlement initiative to a
class of taxpayers) or a disallowance period for a
specific period.''.
(b) Disallowance Period.--Section 6751 of the Internal Revenue Code
of 1986 is amended by adding at the end the following new subsection:
``(d) Disallowance Period.--
``(1) In general.--For purposes of this section, the term
`disallowance period' means--
``(A) with respect to any credit under section 24,
the period determined under section 24(g)(1),
``(B) with respect to any credit under section 25A,
the period determined under section 25A(b)(4)(A), and
``(C) with respect to any credit under section 32,
the period determined under section 32(k)(1).
``(2) Approval required for disallowance period
automatically calculated through electronic means.--With
respect to the application of any disallowance period,
subsection (b)(2)(B) shall not apply.''.
(c) Effective Date.--The amendments made by this section shall
apply to notices sent after the date of the enactment of this Act.
(d) Report.--Not later than 24 months after the date of enactment
of this Act, and annually thereafter, the Secretary of the Treasury (or
the Secretary's delegate) shall make publicly available a report
regarding all penalties assessed by the Internal Revenue Service
pursuant to the Internal Revenue Code of 1986 during the preceding
calendar year, with all relevant data regarding such penalties to be
collected and reported with respect to--
(1) every organizational unit of the Internal Revenue
Service that has power to assess, abate, or otherwise enforce
any penalty imposed by the Internal Revenue Service under the
Internal Revenue Code of 1986, and
(2) the progression of such penalties at each step of the
determination, assessment, and review processes, as well as the
final result with respect to such penalties.
<all>