Fair and Accountable IRS Reviews Act
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Would amend the Internal Revenue Code to tighten procedural requirements for IRS penalty approvals — defining "immediate supervisor" as the person an IRS employee directly reports to, and requiring that written supervisory sign-off occur before any written communication about a penalty is sent to a taxpayer.
What this bill would do
What it would do
The bill would make two targeted changes to Section 6751(b) of the Internal Revenue Code, which governs the approval process for IRS-assessed tax penalties. First, it would codify that a written supervisory approval of an initial penalty determination must be secured before — not merely at some point prior to assessment — any written communication about that penalty, including proposed adjustments, is sent to the taxpayer. Second, it would override the IRS's existing regulatory definition of "immediate supervisor" by defining the term in statute as simply the person to whom the IRS employee making the penalty determination directly reports.
The bill would not change which penalties require supervisory approval, nor would it alter the substantive standards for assessing those penalties. It applies only to notices issued and penalties assessed after December 31, 2025.
Key provisions
- 1Would require written supervisory approval of any penalty determination before any written communication about that penalty — including proposed adjustments — is sent to the taxpayer.
- 2Would define 'immediate supervisor' in statute as the person to whom the IRS employee making the penalty determination directly reports, displacing the existing IRS regulatory definition.
- 3Amendments would apply to notices issued and penalties assessed after December 31, 2025.
Who would be affected
Taxpayers who receive IRS penalty notices, IRS examination employees who propose penalties, and the direct supervisors of those employees. The change particularly affects cases where penalties are proposed as adjustments, since approval must now precede any written communication rather than being obtained at a later stage in the process.
Why it matters
If enacted, taxpayers would have a clearer procedural protection: any penalty notice they receive would already carry a supervisor's written approval, giving them stronger grounds to challenge penalties that skipped that step. It also removes IRS regulatory flexibility to define "immediate supervisor" in ways that allow a more distant or delegated official to satisfy the approval requirement.
What would change
Changes to existing law
Amends Internal Revenue Code of 1986, Section 6751(b)(1) (Sec. 2(a))
Rewrites the penalty-approval provision to require supervisory written approval before any written communication about the penalty is sent to the taxpayer.
Amends Internal Revenue Code of 1986, Section 6751(b) (Sec. 2(b))
Adds a new paragraph defining 'immediate supervisor' as the person to whom the penalty-determining IRS employee directly reports.
Agencies directed to act
Effective dates
- Amendments apply to notices issued and penalties assessed after this date
Funding and costs
Congressional Budget Office estimate
CBO estimates H.R. 5346 would reduce the federal deficit by $117 million over the 2026–2035 period by increasing revenues, with no effect on direct spending.
CBO and the Joint Committee on Taxation (JCT) estimate that the Fair and Accountable IRS Reviews Act would increase federal revenues by $117 million over the 2026–2035 period, reducing the deficit by the same amount. The revenue gain stems from the bill's requirement that IRS employees obtain written supervisor approval before communicating a proposed tax penalty to a taxpayer, which JCT expects would reduce legal disputes over the approval process and cause penalties to be remitted more promptly than under current law. Direct spending (mandatory outlays) would not change, and discretionary administrative costs for the IRS would increase by less than $500,000 over 2026–2030, subject to future appropriations. CBO identified no intergovernmental or private-sector mandates in the bill.
How implementation would work
The changes are largely self-executing amendments to the tax code. The IRS would need to update its internal procedures and potentially revise its regulations defining "immediate supervisor" to conform to the new statutory definition. Supervisors would be required to provide written approval before penalty communications go out — a sequencing change from current IRS practice in some cases. No new agency rulemaking authority is created; compliance would be enforced through existing Tax Court and administrative review channels where taxpayers can challenge procedurally deficient penalties.
Legislative status & sources
Latest action
Received in the Senate and Read twice and referred to the Committee on Finance.
Official CRS summary
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This bill provides that an Internal Revenue Service (IRS) employee’s immediate supervisor for purposes of approving certain federal tax penalties is the person to whom such employee reports. The bill also provides that an immediate supervisor’s approval of certain federal tax penalties must be obtained (in writing) before any written communication related to such penalties is sent to the taxpayer.
As background, current law requires that the initial determination by an IRS employee to assess certain federal tax penalties be approved (in writing) by such employee’s immediate supervisor (or a designated higher-level official). Under IRS regulations, an immediate supervisor is any individual with responsibility to review another individual’s proposed federal tax penalties (without such proposal being subject to an intermediary’s approval). The IRS regulations also establish requirements for when such approval must be obtained based on whether the federal tax penalty is subject to pre-assessment review or raised in Tax Court proceedings.
Legislative subjects
Administrative law and regulatory procedures; Civil actions and liability; Internal Revenue Service (IRS); Tax administration and collection, taxpayers; Taxation
Committee report
H. Rept. 119-318