Once again, the sloppy drafting of Section 6751(b) and the statute’s mechanical application by Circuit Courts of Appeals utterly eviscerate the protection sought in 1998 against IRS juniors using the threat of penalties to beat up taxpayers and obtain unjustified settlements.

True, Wolfgang Frederick Kraske, 161 T. C. 7, filed 10/26/23, loses his companion case, T. C. Memo. 2023-128, filed 10/26/23, a “goofy regulation” Reg. Section 1.183-2(b) case. I won’t blog it, because it’s the usual fact-specific trudge. Wolfgang wasn’t having fun, but he was losing money and burying a lot of his other income.

Wolfgang first tried for Appeals, but missed the 15-day cutoff. His request for Appeals did get to SBSE while the tax compliance officer who issued the 15-day letter (asserting the five-and-ten substantial understatement chops) was still supervised by the same group manager. But the GM OK’d the chops just before Wolfgang’s Appeals request got there. Wolfgang got to Appeals, but lost, got a SNOD and petitioned. He claims Section 6751(b) was violated by the 15-day letter.

Judge Gale says “Not in 9 Cir post Laidlaw.” Ol’ Bill Wise lost Laidlaw’s Harley Davidson Sales, Inc. v. Commissioner, 29 F.4th 1066, 1071 (9th Cir. 2022), rev’g and remanding 154 T.C. 68 (2020).

Wherefore Golsen, to which Judge Gale pays extensive obeisance, applies, extending the holding in Laidlaw from assessibles  to nonassessables (deficiency cases) here. As long as the supervisor was still immediate and assessment (a ministerial act after all administrative and judicial resolution, or possibility thereof, has been exhausted; see Sections 6213(a) and 7481)) not yet made, the 9 Cir rule is “whenever.”

“As previously noted, the Ninth Circuit summarized its holding in Laidlaw’s Harley Davidson in broad terms: ‘[W]e hold that § 6751(b) requires written supervisory approval before the assessment of the penalty or, if earlier, before the relevant supervisor loses discretion whether to approve the penalty assessment.” By its terms, the holding is not confined to assessable penalties, and the Ninth Circuit’s discussion makes clear that it had in mind penalties subject to deficiency procedures when it added the qualifier that a supervisor must have had discretion to approve when acting to do so. Thus, nothing in the Ninth Circuit’s holding or analysis suggests that it might think a timing rule different from its ‘retention of discretion’ rule would apply in the case of penalties subject to deficiency procedures.” 161 T. C. 7, at p. 7. (Citation omitted).

And Golsen says there’s no point in Tax Court’s going contrary to a clear CCA case, only to be reversed.

Unless the Supremes or Congress rescues the Boss Hoss (some hopes!), the statute is a joke.