S. 2358

IRS Accountability and Taxpayer Protection Act

Shown here: Introduced in Senate (2025-07-21)

To amend the Internal Revenue Code of 1986 to modify the procedural rules for penalties.

1. Short title

This Act may be cited as the “IRS Accountability and Taxpayer Protection Act ”.

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.

(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.

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.

(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.

The amendments made by this section shall apply to notices sent after the date of the enactment of this Act.

(d) Report

(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.