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S. 5143Senate119th Congress (2025-2027)In Committee

A bill to amend the Internal Revenue Code of 1986 to modify procedural requirements for penalties and disallowance periods.

Sponsored by Michael F. BennetSen. Michael F. Bennet (D-CO)
Introduced July 28, 2026

AI-Generated Summary

Updated August 4, 2026 at 6:23 AM UTC

The bill changes the tax code to tighten how the IRS can impose penalties and credit disallowance periods. It requires a written electronic approval from a supervisor or the IRS Office of Servicewide Penalties before any penalty or disallowance period takes effect, and that approval must be in place before the first notice that a taxpayer can appeal is sent. It also defines what counts as an “appealable notice” and clarifies the calculation and approval rules for disallowance periods tied to certain tax credits. The changes apply to notices sent after one year and mandate an annual public report on IRS penalties.

Key Provisions

  • Penalties and disallowance periods can only be assessed after a written electronic approval by the decision‑maker’s immediate supervisor or the IRS Office of Servicewide Penalties, and this approval must be obtained before the first appealable notice is sent to the taxpayer.
  • Defines “appealable notice” as the first written notice that gives the taxpayer a chance to appeal to the IRS Independent Office of Appeals or petition a federal court.
  • Adds a definition of “disallowance period” for credits under sections 24, 25A, and 32, specifying the periods determined by existing code provisions.
  • States that for electronically calculated disallowance periods, a certain existing approval requirement does not apply.
  • Sets the effective date to apply to notices sent more than 12 months after enactment.
  • Requires the Treasury Secretary (or delegate) to publish an annual report detailing all IRS penalties assessed, broken down by organizational unit and stage of the penalty process.

Legislative Activity

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1 earlier action
SenateIntro Referral Latest Action

Read twice and referred to the Committee on Finance.

Finance Committee

July 28, 2026

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SenateIntro Referral

Introduced in Senate

July 28, 2026

SenateIntro Referral

Read twice and referred to the Committee on Finance.

Finance Committee

July 28, 2026

Bill Text

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Introduced in SenateIssued July 28, 2026

II

119th CONGRESS

2d Session

S. 5143

IN THE SENATE OF THE UNITED STATES

July 28, 2026

Mr. Bennet introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to modify procedural requirements for penalties and disallowance periods.

1.

Modification of procedural requirements for penalties and disallowance periods

(a)

In general

Section 6751(b) of the Internal Revenue Code of 1986 is amended—

(1)

by striking paragraph (1) and inserting the following:

(1)

In general

No penalty under this title shall be assessed, and no disallowance period shall take effect, unless—

(A)

the decision (as defined by the Secretary in regulations) to apply such penalty or disallowance period, as applicable, is personally approved (in writing on an electronic form) by—

(i)

the immediate supervisor of the individual making such decision, or

(ii)

the Internal Revenue Service Office of Servicewide Penalties (or any successor organization), and

(B)

the approval described in subparagraph (A) is obtained on or before the date any appealable notice is sent to the taxpayer regarding the application of such penalty or disallowance period.

, and

(2)

by adding at the end the following:

(3)

Appealable notice

For purposes of this subsection, the term appealable notice means the first written notice issued to a taxpayer that provides the taxpayer an opportunity to—

(A)

appeal the decision to the Internal Revenue Service Independent Office of Appeals, or

(B)

petition a Federal court for review of the decision.

.

(b)

Disallowance period

Section 6751 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

(d)

Disallowance period

(1)

In general

For purposes of this section, the term disallowance period means—

(A)

with respect to any credit under section 24, the period determined under section 24(g)(1),

(B)

with respect to any credit under section 25A, the period determined under section 25A(b)(4)(A), and

(C)

with respect to any credit under section 32, the period determined under section 32(k)(1).

(2)

Approval required for disallowance period automatically calculated through electronic means

With respect to the application of any disallowance period, subsection (b)(2)(B) shall not apply.

.

(c)

Effective date

The amendments made by this section shall apply to notices sent after the date which is 12 months after the date of the enactment of this Act.

(d)

Report

Not later than 24 months after the date of the enactment of this Act, and annually thereafter, the Secretary of the Treasury (or the Secretary's delegate) shall make publicly available a report regarding all penalties assessed by the Internal Revenue Service pursuant to the Internal Revenue Code of 1986 during the preceding calendar year, with all relevant data regarding such penalties to be collected and reported with respect to—

(1)

every organizational unit of the Internal Revenue Service that has power to assess, abate, or otherwise enforce any penalty imposed by the Internal Revenue Service under the Internal Revenue Code of 1986, and

(2)

the progression of such penalties at each step of the determination, assessment, and review processes, as well as the final result with respect to such penalties.