In Farhy v. Commissioner, ___ F.4th ___ (D.C. Cir. 5/3/24), CADC here, TN here, and GS [to come], the Court of Appeals (Judge Pillard author) held that the IRS has assessment authority for the § 6038(b) penalty. In so holding, the Court rejected the Tax Court holding that the IRS did not have assessment authority. Judge Pillard’s opinion is well-reasoned and presented. Although it is not a short opinion, I highly recommend reading the whole thing.
I will say that the opinion talks in terms of Congress’ intent. Thus, for example, summarizing the reasoning (Slip op. 13-14, emphasis supplied by JAT):
We need not embrace either party’s tax code-wide default rule to resolve this case. We accordingly do not pass on those broader theories beyond explaining why Farhy’s does not preclude assessment of section 6038(b) penalties. Instead, we conclude that a narrower set of inferences suffices to show that Congress intended to render those penalties assessable. Read in light of its text, structure, and function, section 6038 itself is best interpreted to render assessable the fixed-dollar monetary [*14] penalties subsection (b) authorizes. As a result, the Commissioner’s authority to assess all “assessable penalties” encompasses the authority to assess penalties imposed under section 6038(b).
My analysis is that there was no congressional intent on assessment authority issue. But given the schema, one can fairly infer that, had Congress had an intent on the assessment authority issue, it would have been to confer assessment authority on the IRS. That is simply filling in the gaps as a matter of statutory interpretation.
For my thoughts on the issue (noting particularly my skepticism on the Tax Court’s now reversed decision, see my prior blog posts (chronological order)):