See my blogpost “Old Bill Gets On His Bike,” 8/17/18. Old Bill Wise, technophobic but au courant, gets Judge Gustafson to oblige him by tossing the chop in Laidlaw’s Harley Davidson Sales, Inc, 154 T. C. 4, filed 1/16/20.

IRS sent a 30-day letter asserting a Section 6707A chop for failure to report a Section 6011 reportable (the Sterling Benefit Plan, phony health and retirement deductions above permissible). The 30-day letter gave Laidlaw a chance to go to Appeals, which they did. But IRS’ RA only got the Form 300 Civil Penalty Approval Form (CPAF) ninety (count ‘em, ninety) days after the 30-day letter. Appeals tossed Laidlaw, penalty was assessed, and NITL followed. Laidlaw petitioned the NOD that followed their CDP.

IRS has feet of Clay. No timely Boss Hoss.

Judge Gustafson: “The Commissioner argues that the plain language of section 6751(b)(1), as applied to section 6707A penalties (or, for that matter, to any of the other so-called ‘assessable penalties’ found in chapter 68, subchapter B of the Code), demands only that written supervisory approval of an assessable penalty occur before the IRS’s assessment of the penalty–a standard with which the IRS complied in this case.” 154b T. C. 4, at p. 12.

To make that argument to the Great Dissenter in Graev bespeaks a certain desperation.

Judge Gustafson: “Today we reach the question whether the supervisory approval requirement of section 6751(b)(1) applies to the assessable penalty of section 6707A, and the answer is yes.

“The penalty for failure to report a ‘reportable transaction’ is repeatedly identified as a ‘penalty’ in the title and text of section 6707A. That provision is plainly–in the language of section 6751(b)(1)—‘under this title’ (i.e., under title 26 of the United States Code). Section 6751(b)(2) does provide for two exceptions, but neither applies here. First, written supervisory approval is not required for ‘any addition to tax under section 6651, 6654, or 6655’, sec. 6751(b)(2)(A), but this set does not include section 6707A. Second, written supervisory approval is not required for ‘any other penalty automatically calculated through electronic means’, sec. 6751(b)(2)(B), but the Commissioner does not argue that section 6707A constitutes a penalty ‘automatically calculated through electronic means.’ Nor could he so contend. The parties have stipulated that RA C–not a computer—‘made the initial determination to assert the I.R.C. § 6707A penalty against petitioner’, so this was not an instance in which ‘the penalty was determined mathematically by a computer software program without the involvement of a human IRS examiner’. Accordingly, we conclude that the written supervisory approval requirement of section 6751(b)(1) applies to the assessable section 6707A penalty.” 154 T. C.4, at pp. 19-20. (Citation and name omitted).

As for timing, much is made about the supervisor having authority to approve the chop, but that’s not the only test. This has to happen at the examination stage, before penalties are put on the table, to prevent the “bargaining chip” Congress deplored. And Judge Gustafson cites a great authority for that point (himself, dissenting in Graev.). 154 T. C.4, at p. 25.

Appeals was arbitrary and capricious in asserting that Section 6751(b) was complied with. Boss Hoss came too late.

Old Bill wins it.