IRS must get supervisor sign-off before proposing any tax penalty

What it does

This bill amends the tax code to require that before the IRS proposes any penalty to a taxpayer, a supervisor must personally approve the penalty determination in writing. It defines 'immediate supervisor' as the person to whom the IRS employee making the determination reports. The requirement applies to penalties assessed after December 31, 2025.

Why we flagged it

The bill is a narrow procedural amendment to tax administration, requiring supervisory approval before penalty assessment. It does not change substantive tax law, rates, or liability—only the administrative process by which penalties are reviewed and communicated.

What the text implies

• Supervisory approval requirement may create bottlenecks in IRS penalty processing, potentially delaying collection of legitimate penalties and reducing enforcement deterrence.
• The definition of 'immediate supervisor' as 'the person to whom such individual reports' may be ambiguous in matrix or decentralized IRS organizational structures, creating litigation risk over who qualifies.
• Effective date of January 1, 2026 applies only prospectively; penalties assessed before that date are unaffected, creating a narrow window for IRS to issue penalties under the old rule.
• Bill does not specify what happens if supervisory approval is withheld or delayed—no timeline for approval decision, no remedy for taxpayer if approval is unreasonably denied.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

Taxpayers gain a procedural safeguard requiring supervisory review before penalties are proposed, which may reduce arbitrary or erroneous penalties and increase transparency in IRS decision-making. However, the requirement may also delay legitimate penalty assessments, reduce IRS enforcement capacity, and shift compliance costs to the agency—effects that could indirectly reduce tax compliance or increase audit burden on compliant taxpayers.

Named in the bill

Internal Revenue Service (IRS), Internal Revenue Code of 1986, Section 6751(b), U.S. Department of the Treasury

Where it stands

1 cosponsor: 1 Republicans.

• Sep 15, 2025 — Introduced · Congress.gov: “Introduced in House”
• Sep 15, 2025 — Referred to House Committee on Ways and Means and Senate Committee on Finance · Congress.gov: “Referred to the House Committee on Ways and Means”
• Sep 17, 2025 — Markup held in committee · Congress.gov: “Committee Consideration and Mark-up Session Held”
• Sep 17, 2025 — Reported out of committee · Congress.gov: “Ordered to be Reported in the Nature of a Substitute (Amended) by the Yeas and Nays: 44 - 0”
• Dec 1, 2025 — Passed the House · Congress.gov: “On motion to suspend the rules and pass the bill, as amended Agreed to by voice vote. (text: CR H4940-4941)”
• Dec 1, 2025 — Floor vote scheduled · Congress.gov: “Mr. Smith (MO) moved to suspend the rules and pass the bill, as amended”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

1 lobbying clients named this bill on 1 disclosure filings across 1 quarter, Jun 2026 to Jun 2026. Those filings disclosed $1,670,000 in lobbying spend. A filing names 33 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 0% of bills with at least one filing.

Glenn Grothman, the sponsor, reported $325,000 in PAC receipts in the 2026 cycle.

• Nfib (national Federation of Independent Business) — $1,670,000 on 1 filing

Lobbying Disclosure Act filings through Jul 20, 2026. A filing shows who paid to lobby on a bill it names, not what changed.