House Tax Writers Approve Bills to Tighten Requirements for IRS Penalties, Reform Tax Court Procedures

The Ways and Means Committee this month unanimously approved two bills that would reform Tax Court procedures and clarify the requirements for the IRS to assess penalties. The bills enjoy bipartisan support but will likely be caught up in a broader legislative effort to address tax administration issues.

The Fair and Accountable IRS Review Act (H.R. 5346) would clarify when the IRS must obtain supervisory approval to assert penalties. Section 6751(b) currently requires most penalty assessments to be approved in writing by an “immediate supervisor” before the “initial determination.” The requirement does not apply to several delinquency and accuracy-related penalties.

The statute does not define “initial determination” or “immediate supervisor,” and courts have disagreed over when written approval must be obtained in the penalty process. H.R. 5346 would require written approval from “the person to whom such individual reports” before “any written communication with respect to such penalty (including proposal of a penalty as an adjustment) is sent to the taxpayer.”

Such a standard would provide helpful clarity for taxpayers and make it more difficult for IRS agents to threaten penalties as a negotiating tool.  

The Tax Court Improvement Act (H.R. 5349) would make a number of changes to Tax Court procedures, including expanding subpoena authority and clarifying that the Tax Court has jurisdiction over equitable tolling questions.

Both bills could be considered by the full House at some point. They appear to have enough support to pass the House on their own, but full enactment is less likely unless they are incorporated into broader legislative efforts to improve tax administration. Earlier this year, the full House passed several other tax administration bills, including:

• H.R. 1152: The Electronic Filing and Payment Fairness Act would extend the “mailbox” rule to electronic filings so timeliness would be determined based on when an electronic payment or form was sent rather than received. 
• H.R. 998: The Internal Revenue Service Math and Taxpayer Help Act would impose new requirements on the IRS’s ability use math error authority to make adjustments without using the regular deficiency procedures.
• H.R. 1155: The Recovery of Stolen Checks Act would allow the IRS to issue replacement checks for lost tax refund payments as electronic payments. 
• H.R. 997: The National Taxpayer Advocate Enhancement Act of 2025 would give the National Taxpayer Advocate Service authority to hire direct counsel. 
• H.R. 517: The Filing Relief for Natural Disasters Act increases the mandatory filing and payment relief for natural disasters under Section 7508A from 60 days to 120 days and gives the IRS authority to postpone deadlines for state-declared natural disasters.

H.R. 517 was passed in the Senate by unanimous consent and signed into law on July 24 (P.L. 119-29). The other bills appear more likely to be considered as part of broader tax legislation under consideration in the Senate. 

Senate Finance Committee Chair Ron Wyden, D-Ore., and ranking minority member Mike Crapo, R-Idaho, have released a discussion draft and summary of the Taxpayer Assistance and Service Act. It includes similar provisions to the House-passed bills (including on IRS penalty procedures and Tax Court authority) but adds many additional proposals and would grant the IRS the authority to regulate return preparers. 

For a tax administration bill to pass this year, lawmakers would need to resolve the differences among the bills and find an appropriate legislative vehicle. There may not be many opportunities for bipartisan tax legislation this year.