The rule
IRC 6751(b)(1): “No penalty under this title shall be assessed unless the initial determination of such assessment is personally approved (in writing) by the immediate supervisor of the individual making such determination or such higher level official as the Secretary may designate.” “Penalty” includes any addition to tax or additional amount (IRC 6751(c)).
A companion rule, IRC 6751(a), requires every penalty notice to include the name of the penalty, the Code section, and a computation.
On December 23, 2024, Treasury published Treas. Reg. 301.6751(b)-1, which defines the terms, sets deadlines, and gives six examples. The IRM was revised on November 25, 2025 to incorporate it (IRM 20.1.1.2.3).
Penalties that do not need approval
Under IRC 6751(b)(2) and Treas. Reg. 301.6751(b)-1(a)(2), approval is not required for:
- IRC 6651 failure-to-file and failure-to-pay additions;
- IRC 6654 and 6655 estimated tax penalties;
- IRC 6673 sanctions awarded by courts;
- IRC 6662(b)(9) and (b)(10) (certain charitable deduction overstatements and disallowances); and
- any other penalty “automatically calculated through electronic means”.
Everything else asserted by an employee needs approval, including the accuracy-related penalty under IRC 6662(b)(1) to (8), the civil fraud penalty, and assessable penalties proposed in an exam.
Who must approve, and what counts as approval
| Term | Definition in Treas. Reg. 301.6751(b)-1(a)(3) and (4) |
|---|---|
| Individual who first proposed the penalty | The person making the initial determination. A proposal can be made only to the taxpayer or representative, or to the person's supervisor or designated higher level official. Offering the taxpayer a chance to agree to a particular penalty in a particular amount is a proposal; a request for information or an invitation to a class settlement initiative is not. |
| Immediate supervisor | “any individual with responsibility to review another individual's proposal of penalties” without the proposal being subject to an intermediary's approval. |
| Higher level official | Anyone directed by the IRM or job duties to approve another person's penalty proposal before it is included in a pre-assessment notice, a Tax Court answer, or an assessment. For LB&I exams, the case manager is designated (IRM 20.1.1.2.3). |
| Personally approved (in writing) | Any writing, including electronic, signifying assent. “No signature or particular words are required so long as the circumstances of the writing reflect that it was intended as approval.” |
The IRM adds that approval must be dated and kept in the case file, may be on a penalty approval form, email, memo or electronically, and “must cover all tax years and all penalties” (IRM 20.1.1.2.3). IRM 20.1.5.2.1.1 extends that to alternative penalties and recommends forms such as Lead Sheet 300 or Form 4700. On campus correspondence exams the supervisor approves through a CEAS non-action note naming the penalty. An acting supervisor with an approved designation to act counts as the immediate supervisor.
The regulation's examples resolve common disputes. A supervisor's signature on a cover memo sending the case to Appeals is approval (Example 1). Where an issue manager and a case manager both have review roles, approval by either is enough (Example 3). A supervisor who only suggested a penalty did not make the initial determination; the agent who then proposed it to the taxpayer did (Example 5). A Chief Counsel attorney who first raises a penalty in a Tax Court answer is the initial determiner, and the attorney's supervisor must approve before the answer is filed (Example 4).
Timing under the 2024 regulations
For penalties assessed on or after December 23, 2024, written approval must come no later than:
| If the penalty is | Approval is required |
|---|---|
| Not subject to pre-assessment Tax Court review (for example, agreed in an exam, or an assessable penalty) | Before the penalty is assessed |
| Included in a notice that gives the Tax Court jurisdiction (notice of deficiency, FPAA under former IRC 6223, FPA under IRC 6231) | On or before the date the notice is mailed |
| Raised by the IRS in the Tax Court after a petition | No later than the date the Commissioner asks the court to determine the penalty |
Sources: Treas. Reg. 301.6751(b)-1(b) to (d); IRM 20.1.1.2.3.1. In the regulation's Example 2, a supervisor who approved an agreed substantial understatement penalty after the taxpayer signed the report but before assessment satisfied the rule.
For penalties assessed before December 23, 2024, the IRM states the earlier IRS position: approval “was required prior to issuing any written communication of penalties to a taxpayer that offered the taxpayer either an opportunity to sign an agreement, or consent to assessment or proposal of the penalty.” The IRM also says that, as a practice, approval should be secured as soon as practicable once the initial determination is made and before such a communication goes out.
AUR and campus exams
A penalty is “automatically calculated through electronic means” if an IRS computer program generates the notice proposing it. It loses that status if the taxpayer responds, “in writing or otherwise”, challenging the penalty or the tax it is attributable to, and an IRS employee considers the response before assessment or the notice of deficiency (Treas. Reg. 301.6751(b)-1(a)(3)(vi)). IRM 20.1.1.2.3.2 applies this to Automated Underreporter and correspondence exams: no response to the 30-day letter, no approval needed; a response challenging the penalty or tax that an examiner considers, approval required.
Example 6 in the regulation draws the line: a CP2000 response asking only for more time does not challenge anything, so the penalty stayed electronically calculated. A response that disputes the income or the penalty is what triggers the requirement. See CP2000.
Approval the IRS requires by policy
- Fraudulent failure to file. Although IRC 6651 is exempt, the IRS requires written managerial approval for IRC 6651(f) (IRM 20.1.1.2.3; IRM 20.1.2.3.7.5.1).
- Non-assertion. The IRS requires supervisory approval of a decision not to assert the penalty when there is a substantial understatement (IRM 20.1.5.2.1; IRM 20.1.5.9.2).
- Appeals transfers. When a penalty relief case goes to Appeals, the file must include the documentation showing written supervisory approval where IRC 6751(b)(1) requires it (IRM 20.1.1.3.5.1).
How to check compliance
- List every penalty and alternative in the report or notice, with its Code section (IRC 6751(a)).
- Exclude penalties exempt under IRC 6751(b)(2).
- Request the approval document: the penalty lead sheet or approval form, email, or CEAS note. Ask the examiner or Appeals officer, or request the administrative file; see reading the exam file.
- Identify who first proposed each penalty to the taxpayer or to a supervisor, and who approved. Confirm the approver had review responsibility or was a designated higher level official.
- Compare dates: approval against the assessment date, the notice of deficiency mailing date, or the date a penalty was first raised in Tax Court.
- Confirm the approval covers every year and every penalty, including alternatives.
- For AUR or correspondence penalties, determine whether the client's response challenged the penalty or tax and was considered.
Raising the issue
In any court proceeding, IRC 7491(c) gives the IRS the burden of production on penalties for individuals. Appeals has authority to settle penalties based on hazards of litigation (IRM 20.1.1.4.1), so a missing or late approval is worth raising there as well as in a Tax Court petition; see hazards of litigation. For assessed penalties not subject to pre-assessment Tax Court review, the IRM's route after assessment is payment and a claim for refund (IRM 20.1.1.4.2.1). Section 6751(b) bars assessment of the penalty; it does not affect the underlying tax.
Questions practitioners ask
Does the failure-to-file penalty need supervisory approval?
No. IRC 6651 additions are excepted by IRC 6751(b)(2)(A). The IRS requires approval as a matter of policy only for the fraudulent failure-to-file penalty under IRC 6651(f).
Does approval have to be signed?
No. Treas. Reg. 301.6751(b)-1(a)(3)(v) says no signature or particular words are required if the circumstances show the writing was intended as approval. Email and electronic notes count. The IRM requires it to be dated and kept in the file.
When is approval due for a penalty in a notice of deficiency?
On or before the date the notice is mailed, for penalties assessed on or after December 23, 2024, under Treas. Reg. 301.6751(b)-1(c).
Who counts as the immediate supervisor on an LB&I team?
Anyone with responsibility to review the agent's penalty proposal without an intermediary's approval. The IRM also designates the LB&I case manager as a higher level official, and the regulation's Example 3 accepts approval by either an issue manager or the case manager.
Does a CP2000 penalty need approval if my client responds?
Only if the response challenges the penalty or the underlying tax and an employee considers it before assessment or the notice of deficiency. A response asking only for more time does not, per Example 6 of the regulation.
Can an alternative penalty fail if only the primary penalty was approved?
The IRM requires written approval for both primary and alternative penalties and says approval must cover all penalties. An alternative position without its own approval is open to challenge.