Sponsors (7)
The bill strengthens procedural safeguards and transparency to reduce improper penalties and protect refundable credit claimants, but likely slows IRS processing, raises administrative costs, and leaves a gap where some informal IRS communications might evade the new protections.
Low-income taxpayers and families claiming refundable credits (Child Tax Credit, American Opportunity Credit, EITC) gain clearer procedural protections against automated electronic disallowances, reducing risk of improper benefit denials.
Taxpayers generally face fewer improperly assessed penalties because IRS supervisors must personally approve initial penalty determinations in writing before a notice is sent.
Taxpayers and oversight bodies gain greater transparency through annual public IRS reports on all penalties, enabling tracking of penalty use and case outcomes across IRS units.
Taxpayers may experience slower IRS processing and longer waits for notices or resolution of audits and credit claims because of the new required written supervisory sign-off step.
The added supervisory-approval procedure will increase IRS administrative workload and compliance costs, potentially raising indirect costs borne by taxpayers.
Narrowing the definition of what counts as an “initial determination” could let some informal or differently worded IRS communications escape required supervisory review, producing uneven protections for taxpayers.
Based on analysis of 2 sections of legislative text.
Introduced July 21, 2025 by Tim Scott · Last progress July 21, 2025
Changes how the IRS can assess penalties and certain credit disallowances by requiring a supervisor’s written approval of the IRS employee’s initial penalty or disallowance determination before any notice is sent to a taxpayer. It narrows what counts as an “initial determination,” limits some automatic electronic penalty/disallowance approvals, and makes these rules apply to notices sent after the law is enacted. Adds an annual public reporting requirement: the Treasury must publish, starting within 24 months and yearly after that, detailed data on every penalty the IRS assessed the prior year, broken down by IRS unit and showing how each penalty moved through determination, assessment, review, and final outcome. One other, non-substantive section simply provides the law’s short title.