A bill to amend the Internal Revenue Code of 1986 to modify procedural requirements for penalties and disallowance periods.
- Bill Number
- S. 5143
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 2
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2026-07-28: Read twice and referred to the Committee on Finance.
- Last Updated
- 2026-09-28T20:24:10Z
AI-Generated Summary
Purpose This legislation amends the Internal Revenue Code to strengthen procedural safeguards for the Internal Revenue Service (IRS) when applying penalties and certain disallowance periods related to tax credits. It aims to ensure higher-level review before taxpayers receive formal notices that allow appeals or court challenges.
Key Provisions
- Requires personal written approval (on an electronic form) by either the immediate supervisor of the IRS employee making the decision or the IRS Office of Servicewide Penalties before any penalty is assessed or disallowance period takes effect.
- Mandates that this approval occur on or before the date the first "appealable notice" is sent to the taxpayer.
- Defines "appealable notice" as the initial written communication giving the taxpayer the right to appeal to the IRS Independent Office of Appeals or petition a federal court.
- Introduces a definition of "disallowance period" covering specific restrictions on the Child Tax Credit (section 24), education credits (section 25A), and Earned Income Tax Credit (section 32).
- Exempts electronically calculated disallowance periods from certain existing electronic approval rules.
- Requires the Treasury Department to publish an annual public report detailing penalties assessed, including data by IRS organizational unit and the progression through determination, assessment, and review stages.
Significant Changes to Existing Law
- Expands the supervisor approval requirement under section 6751(b) to cover disallowance periods in addition to penalties.
- Shifts the timing of required approval from before assessment to before the first appealable notice is issued.
- Adds the option for approval by the Servicewide Penalties office as an alternative to the immediate supervisor.
- Creates new statutory definitions and reporting obligations not present in current law.
Potential Impacts
- On government agencies: Increases administrative steps for the IRS in penalty and credit disallowance cases, potentially requiring additional training and coordination with the Office of Servicewide Penalties.
- On citizens: Provides taxpayers with earlier documented review of penalties and credit restrictions before formal appeal opportunities arise.
- On international relations: No direct effects identified.
Main Stakeholders Affected
- Taxpayers subject to penalties or disallowance periods for credits under sections 24, 25A, and 32.
- IRS employees involved in penalty assessments and credit examinations.
- The IRS Independent Office of Appeals and federal courts that may review such decisions.
- The Treasury Department, which must produce annual reports.
Notable Legal, Constitutional, or Political Implications
- Strengthens taxpayer procedural protections by formalizing approval processes and timing requirements.
- Introduces new oversight and transparency mechanisms through mandatory public reporting on penalty administration.
- Applies only to notices sent more than 12 months after enactment, allowing time for IRS implementation.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Sen. Bennet, Michael F. [D-CO]
Recent Actions
- 2026-07-28: Read twice and referred to the Committee on Finance.
- 2026-07-28: Introduced in Senate
Bill Versions
- To amend the Internal Revenue Code of 1986 to modify procedural requirements for penalties and disallowance periods. — issued 2026-07-28 — PDF (4 pages)