Note to Readers: This blog entry was posted yesterday to a page rather than a blog page. I have moved it to the blog page. I will leave the page error up with a link to this blog entry. Please comment on this blog page.
Senators Crapo (R) and Wyden (D), prominent Senate Finance Committee members, have proposed a discussion draft, here, of a proposed bill making what Senator Wyden says would be “common-sense fixes to Internal Revenue Service (IRS) procedure and administration.” The proposed bill is nonpartisan. Many of the proposals address issues presented in cases that I have blogged about on the Federal Tax Procedure Blog. Senators Crapo and Wyden’s section-by-section explanation of the proposal is here. The announcement of this initiative, here, seeks comments by March 31, 2025; comments may be sent to discussiondraft@finance.senate.gov.
I have reviewed the section-by-section explanation and parts of the draft bill. For what it is worth, I applaud the proposal. It indeed does provide “common-sense” fixes to problems that have unnecessarily vexed tax procedure. It does not fix all problems, but it fixes a fair number of them. Nor does it fix issues the way I or other practitioners or interested parties would have fixed them, but the fixes are pretty good. With appropriate comments, perhaps other problems could be fixed, and of course the proposals may be fine-tuned and improved.
I link here to the Table of Contents for the proposed bill which I encourage readers to review.
JAT Comments:
My comments are necessarily selective for proposals that particularly interest me (based on my blogging). I encourage readers to read the entire bill and/or the section-by-section explanation.
1. Fixing the supervisor written approval timing requirement in § 6751(b). Sec. 113. Modification of procedural requirements for penalties and disallowance periods.
As I have noted before, current § 6751(b) is poorly drafted. See e.g., Eleventh Circuit Makes Clarity from Confusion as to the Written Supervisor Approval in § 6751(b) (Federal Tax Procedure Blog 9/20/22), here. Poor draftsmanship is not surprising given its genesis in the IRS Restructuring and Reform Act of 1998. See Federal Tax Procedure (2024 Practitioner Ed.) pp. 345 and (2024 Student Ed.) 22. I have posted 26 blog entries, here, on the Federal Tax Procedure Blog discussing § 6751(b). The poor draftsmanship has given hope to those who have abused the tax system that they can avoid penalties for playing the audit lottery for a real or perceived IRS footfault in the assertion of penalties. This hope has played itself out in, for example, syndicated conservation easement cases as recently as January 30 in Park Lake II v. Commissioner, T.C. Memo. 2025-11, GS here (finding no footfault, so that the case can proceed on the merits which may be not much but will chew up a lot of IRS, taxpayer, and Court time and resources).
The solution in the proposed bill is to amend § 6751(b) to require that the supervisor approval must occur before the initial determination of the penalty (much like the current law) but defines initial determination by adding at the end of § 6751(b):
