The House passed two bipartisan bills aimed at strengthening taxpayer rights on December 1 – the Fair and Accountable IRS Reviews (FAIR) Act and the Tax Court Improvement Act.
The bills, which received overwhelming support, attempt to improve IRS and Tax Court procedures. Both bills advanced out of the House Ways and Means Committee with unanimous support back in September.
FAIR Act
The FAIR Act (H.R. 5346) clarifies procedures under IRC § 6751 regarding supervisory approval for certain tax penalties. The bill requires that an IRS employee obtain written approval from their immediate supervisor before sending any written communication to a taxpayer about proposed penalties. It also defines “immediate supervisor” as the person to whom the employee reports.
During floor debate on December 1, lead sponsor Representative Glenn Grothman (R-WI) noted that, “for decades, Federal laws required that before the IRS can impose penalties on a taxpayer, an agent must first receive written approval from that agent’s immediate supervisor.” However, a “regulatory interpretation complicated the intent of this longstanding statute,” allowing agents to seek approval from a wider range of individuals, Grothman explained.
The FAIR Act “restores clarity,” Grothman said, and “reaffirms that an IRS agent’s actual immediate supervisor must provide written approval at the initial determination of a penalty.” The bill “fixes an ongoing controversy regarding tax penalties and IRS supervisory approvals,” added Representative Terri Sewell (D-AL).
Ways and Means Chair Jason Smith (R-MO) also spoke in support of the bill. “Right now, an IRS agent can impose a penalty on an American taxpayer before obtaining a supervisor’s approval,” he noted. “They can shop around for any other employee at the agency that they wish to seek permission from,” said Smith, which “undermine[s] the no-signature, no-penalty principle.”
Tax Court Improvement Act
The Tax Court Improvement Act (H.R. 5349), co-led by Representatives Sewell and Nathaniel Moran (R-TX), introduces four reforms to streamline Tax Court procedures, provide additional rights for taxpayers, and increase internal accountability.
The bill grants the Tax Court discretion to extend filing deadlines in cases where equity warrants it, such as during courthouse closures or extraordinary circumstances. It also expands the role of special trial judges, allowing them to hear more types of cases with the taxpayer’s consent and granting them limited contempt authority.
In addition, the bill holds Tax Court judges to the same recusal standards as other federal judges. Finally, it enables Tax Court judges to require documents before hearings through subpoena authority – with the goal of facilitating faster settlements and reducing costs for taxpayers.
“For too long, the Tax Court has operated under preexisting rules that do not mirror many of the well-established procedures for other courts and rules that are antiquated in their application,” said Moran. “When a system is slow or confusing, the burden falls on taxpayers,” he added.
The Tax Court is “the only venue where taxpayers can dispute a tax estimate without first paying that tax,” Smith stressed. “Without the guarantee of rights, taxpayers are put in a situation where the IRS is essentially saying: Heads, I win. Tails, you lose.”
Broad and Bipartisan Support
Both bills had bipartisan support in the House, with lawmakers emphasizing the need for taxpayer protections and a more efficient tax system. Several organizations also voiced strong support, including the Taxpayers Protection Alliance, Small Business and Entrepreneurship Council (SBEC), National Taxpayers Union, and National Federation of Independent Business.
The Tax Court Improvement Act “promotes fairness and aims to reduce complexity and costs for small businesses faced with an IRS tax dispute,” said SBEC President Karen Kerrigan. The Taxpayers Protection Alliance President David Williams noted that the bill “makes long-overdue updates to ensure that the U.S. Tax Court operates with the independence and fairness that taxpayers deserve.”
And the FAIR Act “would protect taxpayers facing IRS penalties by clarifying in statute that IRS agents must receive approval from their immediate supervisor prior to imposing penalties,” according to the National Taxpayers Union. Williams said the bill “responds directly to concerns about arbitrary or inconsistent IRS enforcement” by “establishing clearer standards for reviews and appeals.”
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