HB 5346 amends Internal Revenue Code section 6751(b)(1) to require that the initial determination to assess a tax penalty be personally approved in writing by the employee’s immediate supervisor (or a higher-level official designated by the Secretary) before any written communication about the penalty is sent to a taxpayer. The bill also defines “immediate supervisor” as the person to whom the employee reports and applies the rule to notices and penalties issued after December 31, 2025.
This is a procedural tightening: the statutory change turns supervisory sign-off into a timing requirement that must precede written outreach to taxpayers, including penalty proposals as adjustments. That creates a new internal checkpoint designed to reduce erroneous or premature penalty actions, but it also alters workflow and approval burdens inside IRS examination and collection processes—potentially slowing assessments and requiring case-management changes.
At a Glance
What It Does
Amends IRC §6751(b)(1) to require that the initial penalty determination be personally approved in writing by the employee’s immediate supervisor (or a higher official as designated) before any written communication about that penalty is sent to the taxpayer, including proposals of penalties as adjustments.
Who It Affects
IRS exam and collection employees who propose or assess penalties, their supervisors and managers, tax practitioners handling audits, and taxpayers who receive penalty proposals or notices after December 31, 2025.
Why It Matters
The bill converts supervisory approval into a hard procedural precondition, creating a clearer internal-control rule and a likely procedural basis for taxpayer challenges when approvals are missing or untimely; it will force operational changes in how the IRS documents and routes penalty decisions.
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What This Bill Actually Does
The bill changes one line in the tax code but moves a lot of authority closer to supervisors. Under the amended text, an agent who decides a taxpayer should face a penalty cannot send any written paperwork proposing or asserting that penalty until that decision is personally approved in writing by the agent’s immediate supervisor.
The Secretary may allow a higher-level official to approve instead, but the point is the same: written supervisor sign-off must come before any written contact about the penalty.
A second short paragraph in the statute defines “immediate supervisor” simply as the person to whom the agent reports. That eliminates ambiguity about whether a distant manager or an administrative delegate counts as the supervisor for purposes of the approval requirement; approval must come from the agent’s direct reporting line unless the Secretary designates someone else.Operationally, the rule affects the timing and routing of penalty work.
Teams that currently draft penalty proposals and send them under an agent’s signature will need a documented supervisor approval step in the case file before transmitting those proposals. Automated systems that generate penalty communications, batch letters, or adjustment proposals will need new checks or reconfiguration, and supervisors will face a new volume of written approvals to execute and retain.Finally, the bill’s effective date means the rule governs notices and penalties issued after December 31, 2025.
Practically, that creates a clear cut-off for implementation planning: case managers will need to update procedures, training, and IT systems before that date or risk producing penalty communications that lack the statutory pre-approval this amendment requires.
The Five Things You Need to Know
The bill amends IRC §6751(b)(1) to require personal, written approval by the immediate supervisor before any written communication about a penalty is sent to the taxpayer.
The approval requirement explicitly covers proposals of penalties as adjustments and other written communications, not only final assessments.
The Secretary of the Treasury may designate a higher-level official to provide the required approval instead of the immediate supervisor.
The bill adds a definition: “immediate supervisor” means the person to whom the individual making the determination reports.
The amendments apply to notices issued and penalties assessed after December 31, 2025.
Section-by-Section Breakdown
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Short title — 'Fair and Accountable IRS Reviews Act'
This section only supplies the bill’s short name. It has no operative effect on IRS practices but frames the statute for citations and references in guidance or litigation.
Require written supervisory approval before written penalty communications
The core textual change requires that the initial determination to assess a penalty be personally approved in writing by the individual’s immediate supervisor (or a higher-level official designated by the Secretary) before any written communication about the penalty is sent to the taxpayer. Practically, this is a timing rule: approval must precede outreach. It converts what was previously an approval condition (which courts have sometimes interpreted in varying ways) into an explicit precondition tied to the transmission of written communications, including proposals of penalties as adjustments.
Defines who counts as the approving supervisor
This short addition defines ‘immediate supervisor’ as the person to whom the employee making the penalty determination reports. That narrows the possibilities for creative delegation: approving officials must be on the agent’s direct reporting line unless the Secretary designates an alternative. For managers and compliance officers, that clarifies who must execute approvals and where accountability attaches when paperwork is missing or defective.
Rule applies to notices and penalties after Dec. 31, 2025
The effective date makes the provision prospective, covering penalty notices and assessments issued after December 31, 2025. This creates a discrete implementation deadline for the IRS to update procedures, train personnel, and modify any automated communication systems that generate penalty letters or proposals.
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Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Taxpayers facing enforcement actions — The added pre-approval step reduces the risk of receiving premature or improperly supported written penalty proposals and creates a clearer procedural basis to contest penalties issued without proper approval.
- Tax practitioners and advisers — Clearer statutory approval timing gives representatives a defined procedural ground to raise by motion or administrative protest when penalties lack pre-approval documentation.
- IRS oversight and accountability functions — Supervisors and internal auditors gain a statutory control to point to when enforcing managerial accountability, making it harder for frontline staff to issue penalties without supervisory review.
Who Bears the Cost
- IRS frontline supervisors — Supervisors must provide and retain written approvals for every initial penalty determination routed to them, increasing their administrative workload and exposing them to more direct accountability for penalty decisions.
- IRS operations and IT systems — Case management and automated letter-generation platforms will require changes to enforce the pre-approval step and to store written approvals, creating project, testing, and maintenance costs.
- Revenue collection/timeliness — The new approval step can delay the delivery of penalty notices and the start of enforcement timelines, potentially affecting revenue timing and requiring workflow adjustments in examination and collection units.
Key Issues
The Core Tension
The bill pits two legitimate goals against each other: strengthening taxpayer protections through deliberate supervisory review versus preserving the IRS’s ability to assess and communicate penalties quickly and without additional bottlenecks; the statute solves accountability gaps but risks slowing enforcement and adding administrative cost.
The bill is narrowly worded but leaves multiple implementation questions that could affect its practical reach. It requires a ‘personal[] approved (in writing)’ sign-off, but it does not define what form of writing suffices (wet signature, typed name in an electronic case note, secured electronic signature).
Agencies will need guidance to determine whether an email, a case-management entry, or an e-signature meets the statutory requirement. Similarly, the Secretary’s authority to designate a higher-level official is broad; the Treasury could use that authority to centralize approvals or to create exception pathways, undermining the local supervisory checkpoint the statute otherwise creates.
Another tension is between procedural protection and administrative efficiency. Requiring prior supervisor approval can reduce erroneous penalties, but it also introduces a chokepoint in high-volume contexts (e.g., automated assessments or routine civil penalties) that could increase processing time, backlog risk, and litigation over timing.
Finally, the statute’s utility as a litigation tool depends on how courts treat noncompliance: if courts invalidate penalties wholly where pre-approval is missing, taxpayers gain leverage; if courts instead apply harmless-error principles, the operational impact will be smaller but compliance costs for the IRS will remain.
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