Internal Revenue Manual, Part 20: Penalty and Interest

Defining Bills of Attainder-Thomas M. Saunders

U.S. Constitution, Article 1, Section 9, Clause 3:

“No Bill of Attainder or ex post facto Law shall be passed.” (with respect to the U.S. Congress)

United States v. Wheeler, 254 U.S. 281, 65 L.ed. 270, 41 S.Ct. 133

The United States is without power to forbid and punish infractions by individuals of the rights of citizens to reside peacefully in the several states, and to have free ingress into and egress from such states.  Authority to deal with such wrongs is exclusively within the power reserved by the Federal Constitution to the states.
[United States v. Wheeler, 254 U.S. 281, 65 L.ed. 270, 41 S.Ct. 133. ]

Internal Revenue Manual, Section 25.25.10.5.2. Handling of Returns and Claims

Internal Revenue Manual
25.25.10.5.2 (09-28-2020)

Handling of Returns and Claims

1. Screen returns/claims to determine if FRP criteria has been met. Ensure FRP Technical Coordinator determinations are input to FRP Master on notated frivolous return/claims. Refer to IRM 25.25.10.2, Identification of Frivolous Submissions for criteria.

   Note: 

   Pursuant to a recent Tax Court opinion, we must obtain written supervisory approval of a civil penalty, including section 6702, before assessing a penalty. See Clay v. Commissioner, 152 T.C. 222 (2019). The Tax Court has ruled that the IRS supervisory approval for the section 6702 penalty does not need to be obtained before issuing Letter 3176C (Kestin v. Commissioner, 153 T.C. 14 (2019). The best time to obtain supervisory approval for the section 6702 penalty is after the expiration of the 30 day period provided in Letter 3176C (allowing the taxpayers to correct their frivolous filing). Supervisory approval must be obtained before sending any further written communication regarding the penalty to the taxpayer.

   Note: 

   BMF returns require expedited handling (2 business days) to avoid interest on legitimate refunds.

[Internal Revenue Manual, Section 25.25.10.5.2. Handling of Returns and Claims
https://www.irs.gov/irm/part25/irm_25-025-010r]

US v. Yunis, 924 F.2d. 1086 - Court of Appeals, Dist. of Columbia Circuit 1991

To be sure, courts should hesitate to give penal statutes extraterritorial effect absent a clear congressional directive. See Foley Bros. v. Filardo, 336 U.S. 281, 285, 69 S.Ct. 575, 577, 93 L.Ed. 680 (1949); United States v. Bowman, 260 U.S. 94, 98, 43 S.Ct. 39, 41, 67 L.Ed. 149 (1922).
[US v. Yunis, 924 F.2d. 1086 - Court of Appeals, Dist. of Columbia Circuit 1991]

26 U.S.C. §6673: - Sanctions and costs awarded by courts

TITLE 26 > Subtitle F > CHAPTER 68 > Subchapter B > PART I > Sec. 6673.

Sec. 6673. - Sanctions and costs awarded by courts

(a) Tax court proceedings

(1) Procedures instituted primarily for delay, etc.

Whenever it appears to the Tax Court that -

(A) proceedings before it have been instituted or maintained by the taxpayer primarily for delay,

(B) the taxpayer's position in such proceeding is frivolous or groundless, or

(C) the taxpayer unreasonably failed to pursue available administrative remedies, the Tax Court, in its decision, may require the taxpayer to pay to the United States a penalty not in excess of $25,000.

(2) Counsel's liability for excessive costs

Whenever it appears to the Tax Court that any attorney or other person admitted to practice before the Tax Court has multiplied the proceedings in any case unreasonably and vexatiously, the Tax Court may require -

(A) that such attorney or other person pay personally the excess costs, expenses, and attorneys' fees reasonably incurred because of such conduct, or

(B) if such attorney is appearing on behalf of the Commissioner of Internal Revenue, that the United States pay such excess costs, expenses, and attorneys' fees in the same manner as such an award by a district court.

(b) Proceedings in other courts

(1) Claims under section 7433

Whenever it appears to the court that the taxpayer's position in the proceedings before the court instituted or maintained by such taxpayer under section 7433 is frivolous or groundless, the court may require the taxpayer to pay to the United States a penalty not in excess of $10,000.

(2) Collection of sanctions and costs

In any civil proceeding before any court (other than the Tax Court) which is brought by or against the United States in connection with the determination, collection, or refund of any tax, interest, or penalty under this title, any monetary sanctions, penalties, or costs awarded by the court to the United States may be assessed by the Secretary and, upon notice and demand, may be collected in the same manner as a tax.

(3) Sanctions and costs awarded by a court of appeals

In connection with any appeal from a proceeding in the Tax Court or a civil proceeding described in paragraph (2), an order of a United States Court of Appeals or the Supreme Court awarding monetary sanctions, penalties or court costs to the United States may be registered in a district court upon filing a certified copy of such order and shall be enforceable as other district court judgments. Any such sanctions, penalties, or costs may be assessed by the Secretary and, upon notice and demand, may be collected in the same manner as a tax

26 U.S.C. §6694:  Understatement of taxpayer's liability by income tax return preparer

26 U.S.C. §6695: Other assessable penalties with respect to the preparation of income tax returns for other persons

26 U.S.C. §6671(b):  Definition of "person" for the purposes of all penalties and sanctions

TITLE 26 > Subtitle F > CHAPTER 68 > Subchapter B > PART I > Sec. 6671.

Sec. 6671. - Rules for application of assessable penalties

(a) Penalty assessed as tax

The penalties and liabilities provided by this subchapter shall be paid upon notice and demand by the Secretary, and shall be assessed and collected in the same manner as taxes. Except as otherwise provided, any reference in this title to ''tax'' imposed by this title shall be deemed also to refer to the penalties and liabilities provided by this subchapter.

(b) Person defined

The term ''person'', as used in this subchapter, includes an officer or employee of a corporation, or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs

Black's Law Dictionary, Sixth Edition, p. 165:

Bill of attainder:  Legislative acts, no matter what their form, that apply either to named individuals or to easily ascertainable members of a group in such a way as to inflict punishment on them without a judicial trial.  United States v. Brown, 381 U.S. 437, 448-49, 85 S.Ct. 1707, 1715, 14 L.Ed. 484, 492; United States v. Lovett, 328 U.S. 303, 315, 66 S.Ct. 1073, 1079, 90 L.Ed. 1252.  An act is a "bill of attainder" when the punishment is death and a "bill of pains and penalties" when the punishment is less sever; both kinds of punishment fall within the scope of the constitutional prohibition.  U.S.Const. Art. I, Sect 9, Cl. 3 (as to Congress);' Art. I, Sec, 10 (as to state legislatures). [Emphasis added] 

[Black's Law Dictionary, Sixth Edition, p. 165]

DEFINITION OF "PERSON" FOR THE PURPOSE OF PENALTIES UNDER THE INTERNAL REVENUE CODE:

[Code of Federal Regulations]

[Title 26, Volume 17, Parts 300 to 499]

[Revised as of April 1, 2000]

From the U.S. Government Printing Office via GPO Access

[CITE: 26CFR301.6671-1]

[Page 402]

TITLE 26--INTERNAL REVENUE

Additions to the Tax and Additional Amounts--Table of Contents

Sec. 301.6671-1 Rules for application of assessable penalties.

…

(b) Person defined. For purposes of subchapter B of chapter 68, the term ``person'' includes an officer or employee of a corporation, or a member or employee of a partnership, who as such officer, employee, or member is under a duty to perform the act in respect of which the violation occurs.

PARALLEL TABLE OF AUTHORITIES AND RULES

Look in this table for regulations implementing penalties under the Internal Revenue Code.  There are none!

  IRS Due Process Meeting Worksheet:  Shows missing implementing regulations relating to enforcement of income taxes!

26 C.F.R. §1.6661-6 Waiver of penalty.

(a) In general.

The Commissioner may waive all or part of the penalty imposed by section 6661 on a showing by the taxpayer that there was reasonable cause for the understatement (or part thereof) and that the taxpayer acted in good faith. The circumstances taken into account in determining whether to waive the penalty are described in paragraph (b) of this section. In addition, paragraph (c) of this section describes circumstances in which the penalty will always be waived.

(b) Reasonable cause and good faith.

In making a determination regarding waiver of the penalty under section 6661, the most important factor in all cases not described in paragraph (c) of this section will be the extent of the taxpayer's effort to assess the taxpayer's proper tax liability under the law. For example, reliance on a position contained in a proposed regulation would ordinarily constitute reasonable cause and good faith. In addition, circumstances that may indicate reasonable cause and good faith include an honest misunderstanding of fact or law that is reasonable in light of the experience, knowledge, and education of the taxpayer. Moreover, a computational or transcriptional error would, in general, indicate reasonable cause and good faith. Reliance on an information return or on the advice of a professional (such as an appraiser, an attorney, or an accountant) would not necessarily constitute a showing of reasonable cause and good faith. Similarly, reliance on facts that, unknown to the taxpayer, are incorrect would not necessarily constitute a showing of reasonable cause and good faith. Reliance on an information return, professional advice, or other facts, however, would constitute a showing of reasonable cause and good faith if, under all the circumstances, such reliance was reasonable and the taxpayer acted in good faith. For example, reliance on erroneous information, (such as an error relating to the cost of property, the date property was placed in service, or the amount of opening or closing inventory) inadvertently included in data compiled by the various divisions of a multidivisional corporation or in financial books and records prepared by those divisions would, in general, indicate reasonable cause and good faith, provided the corporation had internal controls and procedures, reasonable under the circumstances, that were designed to identify factual errors. Accordingly, waiver of the section 6661 penalty attributable to an understatement caused by such an error would be appropriate. Similarly, a taxpayer's reliance on erroneous information reported on a Form 1099 would indicate reasonable cause and good faith, and waiver would be appropriate, if the taxpayer did not know or have reason to know that the information was incorrect. Generally, a taxpayer would know or have reason to know that the information on a Form 1099 is incorrect only if such information is inconsistent with other information reported to the taxpayer or is inconsistent with the taxpayer's knowledge concerning the amount and rate of return of the payor's obligation. In the case of an understatement that is related to an item on the return of a pass-through entity (as defined in section 1.6661-4(e)), the good faith or lack of good faith of the entity generally will be imputed to the taxpayer that has the understatement. Any good faith imputed to the taxpayer under the preceding sentence, however, may be refuted by other factors indicating lack of good faith on the part of the taxpayer.