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April 11, 2023

Proposed rules on IRS supervisory approval requirements clarify timing and authority

  • The proposed regulations would give bright-line rules on who can approve certain penalty assessments and when they must do so.
  • The clarifications resolve the conflicting court opinions that have interpreted the approval rules in an inconsistent manner.
  • This will help taxpayers avoid confusion and help IRS better administer the penalty provisions.

The IRS has issued proposed rules (REG-121709-19) on supervisory approval of certain penalties assessed by the IRS under IRC Section 6751(b). The proposed rules are aimed at addressing uncertainty that has arisen as the result of several judicial decisions. The proposed rules include the timing requirements for three types of penalties and define exactly who can give the approvals.

The proposed rules would apply to penalties assessed on or after the date final rules are published in the Federal Register.


IRC Section 6751(b) requires penalty assessments under IRC Section 6751(a) to be personally approved (in writing) by the immediate supervisor of the individual making the determination or a higher-level official as designated by the Treasury Secretary.

Various federal district and appellate courts have found inconsistently on issues, such as when the approvals must be made and who is authorized to make those approvals.

In the summary, the IRS said the "proposed regulations are intended to clarify the application of [S]ection 6751(b) in a manner that is consistent with the statute and its legislative history, has nationwide uniformity, is administrable for the IRS, and is easily understood by taxpayers."

Timing rules

The proposed regulations would adopt the following timing rules for three types of penalties.

Penalties included in a pre-assessment notice: For penalties included in a pre-assessment notice that is subject to the Tax Court's review, such as a statutory notice of deficiency, supervisory approval may be obtained at any time before the IRS issues the notice. This "bright line rule" would allow the IRS to review the penalty assessment while it still has discretion to consider all the factors.

Penalties raised in Tax Court: For penalties the IRS raises in an answer, amended answer or amendment to the answer to a Tax Court petition, supervisory approval may be obtained at any time before the commissioner requests that the Tax Court determine the penalty.

Penalties not subject to pre-assessment review in the Tax Court: For these penalties, supervisory approval may be obtained at any time before assessment of the penalties.


The proposed rules would clarify the terms used in IRC Section 6751(b) by defining them as follows:

Immediate supervisor: The proposed regulations define immediate supervisor as any individual with responsibility to approve another individual's proposed penalty without the need for an intermediary's approval. The term is not limited to a single individual but can be individuals who, as part of their job, directly approve a penalty proposed by another. This includes acting supervisors operating under a proper delegation of authority.

Higher-level individual: The proposed regulations define higher-level individual as any individual who is allowed by the Internal Revenue Manual or their assigned job duties to approve another individual's proposed penalties. The higher-level individual must be higher work-level than the person making the initial penalty determination but does not have to be higher than that individual's supervisor.

Personally approved (in writing): Under the proposed regulations, this standard is met by "[a]ny writing, including in electronic form, that is made by the writer to signify the writer's assent and that reflects that it was intended as approval." There are no formal requirements for this written approval, for example, "a supervisor's signature on a cover memorandum or a letter transmitting a report containing penalties is sufficient approval of the penalties contained in the report."


The rules under IRC Section 6751(b)(1) do not apply to (1) penalties under IRC Sections 6651, 6654, 6655, 6673, 6662(b)(9), or 6662(b)(10) or (2) any other penalty automatically calculated through electronic means.

The proposed rules would clarify that penalties calculated through "electronic means" refers to penalties proposed by "an IRS computer program without human involvement." If a taxpayer responds to a computer-generated notice and challenges the penalty, the electronic-means exception no longer applies because an IRS employee would then be working the case.


The proposed rules should clarify the application of IRC Section 6751(b) by resolving inconsistent timing and approval requirements from different courts. The rules attempt to clearly set out both the timing required for the different types of penalties and which IRS employees can sign off.

The Preamble to the proposed rules affirms the longstanding policy that "penalties are not a 'bargaining point' in resolving the taxpayer's other tax adjustments," and that the IRS should give "full and fair consideration to evidence in favor of not imposing the penalty." The proposed rules would allow supervisors to effectuate these policies. Once the regulations are finalized, they should make penalty application less confusing and cut down litigation on procedural issues associated with penalties.


Contact Information
For additional information concerning this Alert, please contact:
Tax Policy and Controversy
   • Bryon Christensen (
   • Kirsten Wielobob (
   • Kiara Rankin (

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor