John Thomas Minemyer v. Commissioner of Internal Revenue

26 U.S.C. § 6751 was added to the Code by section 3306 of the Internal Revenue Service Restructuring and Reform Act of 1998 (1998 Act), Public Law 105-206, 112 Stat. 685, 744 (1998). The report of the United States Senate Committee on Finance regarding the 1998 Act (1998 Senate Finance Committee Report) provides that Congress enacted section 6751(b)(1) because of its concern that, “[i]n some cases, penalties may be imposed without supervisory approval.” S. Rep. No. 105-174, at 65 (1998), 1998-3 C.B. 537, 601. The report further states that “[t]he Committee believes that penalties should only be imposed where appropriate and not as a bargaining chip.” Id. The report provides that, to achieve this goal, section 6751(b)(1) “requires the specific approval of IRS management to assess all non-computer generated penalties unless excepted.” The Second Circuit concluded the intent of I.R.C. § 6751(b)(1)." “The statute was meant to prevent IRS agents from threatening unjustified penalties to encourage taxpayers to settle.” ("[T]he IRS will often say, if you don't settle, we are going to assert the penalties."). The Tax Court has held that supervisory approval must be obtained before the first communication to the taxpayer that demonstrates that an initial determination has been made. See, e.g., Belaud v. Commissioner, 156 T.C. 80 (2021); Kroner v. Commissioner, T.C. Memo. 2020-73, rev'd 48 F. 4th 1272 (11th Cir. 2022); Carter v. Commissioner, T.C. Memo. 2020—21, rev'd 2022 WL 4232170 (11th Cir. Sept. 14, 2022).