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cannot assess a penalty unless the initial LINE
determination of the assessment is ITEMS
“personally approved (in writing) by the
immediate supervisor of the individual
making such determination.”
The Tax Court held that the Sec. For these full stories plus the latest tax news, visit
6751(b)(1) written supervisory approval journalofaccountancy.com and thetaxadviser.com.
requirement applies to the Sec. 6707A
penalty. It also held that the proposal More Schedule K-2 and K-3 FAQs posted
of a penalty assessment in the 30-day In eight new FAQs on its website, the IRS covers some
letter was an “initial determination” for special issues, including several that it says will be added
purposes of Sec. 6751(b)(1) that required to the forms’ instructions.
written supervisory approval. Because
the IRS obtained written supervisory SALT cap challenge is denied Supreme Court
approval after the 30-day letter was sent, review
the Tax Court held that it had failed The $10,000 limitation on deducting state and local taxes
to comply with Sec. 6751(b)(1), and stands after the Supreme Court declined to review a long-
the court granted the taxpayer’s mo- running lawsuit by New York and three other states.
tion for summary judgment (Laidlaw’s
Harley Davidson Sales, Inc., 154 T.C. Supreme Court holds Tax Court not bound by
No. 4 (2020)). The IRS appealed to the petition filing deadline
Ninth Circuit. The 30-day limit under Sec. 6330(d) for petitioning the
Issues: The question before the appeals Tax Court to review an IRS determination is nonjurisdic-
court was whether the IRS had complied tional and can be equitably tolled, the Court holds in the
with Sec. 6751(b)(1) written supervisory case of a taxpayer whose petition was one day late.
approval requirement. The IRS argued
that Sec. 6751(b)(1) requires that it secure IRS funding, technology assessed in House
supervisory approval only before the hearing
assessment of a penalty. The taxpayer, on IRS Commissioner Charles Rettig and National Taxpayer
the other hand, pointed to Tax Court prec- Advocate Erin Collins testify to the House Oversight and
edent (Clay, 152 T.C. 223 (2019)) holding Reform Committee.
that supervisory approval is required
before the IRS “formally communicates Treasury equity action plan reports progress
to the taxpayer its determination that The tax implications of the Biden administration’s policy
the taxpayer is liable for the penalty” and of advancing racial equity and support for underserved
argued that the 30-day letter embodied communities across the government are outlined.
that first formal communication.
Holding: The Ninth Circuit held
(with one judge dissenting) that Sec.
6751(b) requires written supervisory penalty . . . shall be assessed” without the supervisor had signed the Form 300,
approval only before assessment of the written approval by a supervisor. providing written approval.
penalty or, if earlier, before the relevant In this case, the court found, the The Ninth Circuit concluded that the
supervisor loses discretion whether to supervisor gave written approval of the IRS had therefore satisfied Sec. 6751(b).
approve the penalty assessment. It re- initial penalty determination before the Accordingly, the appeals court reversed
jected the Tax Court’s holding that Sec. penalty was assessed and while she still the Tax Court’s grant of the taxpayer’s
6751(b)(1) requires supervisory approval had discretion to withhold approval. The motion for summary judgment and re-
before the IRS formally communicates court held that, while the 30-day letter manded the case for further proceedings.
a proposed penalty to a taxpayer because threatened assessment of the penalty, ■ Laidlaw’s Harley Davidson Sales,
the statute does not make any reference it did not assess a penalty; the penalty Inc., No. 20-73420 (9th Cir. 3/25/22)
to the communication of a proposed was not actually assessed until after the
penalty to the taxpayer, much less a “for- taxpayer’s administrative appeal was — Alistair M. Nevius, J.D., is the JofA’s
mal” communication; it merely says “No unsuccessful — some two years after editor-in-chief, tax. ■

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