Burt Kroner v. Commissioner of Internal Revenue ( 2022 )

USCA11 Case: 20-13902 Date Filed: 09/13/2022 Page: 1 of 21
[PUBLISH]
In the
United States Court of Appeals
For the Eleventh Circuit
____________________
No. 20-13902
____________________
BURT KRONER,
Petitioner-Appellee,
versus
COMMISSIONER OF INTERNAL REVENUE,
Respondent-Appellant.
____________________
Petition for Review of a Decision of the
U.S. Tax Court
Agency No. 23983-14
____________________
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2 Opinion of the Court 20-13902
Before NEWSOM, BRANCH, and BRASHER, Circuit Judges.
BRASHER, Circuit Judge:
This appeal is about the IRS’s process for assessing tax pen-
alties. By statute, the IRS cannot assess certain penalties against a
delinquent taxpayer “unless the initial determination of such as-
sessment is personally approved (in writing) by the immediate su-
pervisor of the individual making such determination . . . .” 26
U.S.C. § 6751(b). That statute tells us who must approve—the im-
mediate supervisor—and how that approval must be made—in
writing. This appeal presents the questions of what the supervisor
must approve and when the supervisor must approve it. We have
previously avoided deciding these questions, see TOT Prop. Hold-
ings, LLC v. Comm’r, 1 F. 4th 1354, 1372 n.25 (11th Cir. 2021), but
must answer them now because they control the resolution of this
appeal.
Burt Kroner failed to report millions of dollars in income.
After an audit, an IRS examiner sent him a letter that said Kroner
owed penalties on top of his back taxes. See 26 U.S.C. § 6662. Kro-
ner tried to negotiate without success; the examiner’s direct super-
visor signed a second letter, which proposed the same penalties, as
well as a form approving those penalties. Eventually, after more
failed negotiation, the IRS issued Kroner a statutory notice of defi-
ciency, which triggered his right to petition the Tax Court for re-
view. The Tax Court disallowed the penalties, holding that the su-
pervisor’s approval came too late because she had not approved
the penalties at the time of the first letter. The IRS appealed,
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20-13902 Opinion of the Court 3
arguing that the Tax Court misinterpreted Section 6751(b)’s re-
quirements.
We agree with the IRS. Section 6751(b) says that “[n]o pen-
alty . . . shall be assessed unless the initial determination of such
assessment is personally approved. . . .” The statute prohibits as-
sessing a penalty unless a condition has been met—supervisory ap-
proval of the initial determination of assessment. But the statute
regulates assessments; it does not regulate communications to the
taxpayer. Because the IRS did not assess Kroner’s penalties without
a supervisor approving an “initial determination of such assess-
ment,” we hold that the IRS has not violated Section 6751(b). Thus,
we reverse the Tax Court.
I.
In our system, the government does not send bills to taxpay-
ers, instead relying on honest self-reports in the form of tax returns.
When the IRS identifies a problem with respect to certain types of
tax on a return, it must take several steps to convert that underre-
ported liability into an “assessment of tax.” The first of these is the
“determination” of a “deficiency.” A deficiency is the amount by
which a taxpayer’s liability exceeds the liability that he reports on
his return, including any applicable penalties. 26 U.S.C. § 6211.
Once the IRS “determines that there is a deficiency in respect of
any [such] tax,” it is “authorized to send notice of such deficiency
to the taxpayer.” 26 U.S.C. § 6212(a). A taxpayer served with such
a notice may file a petition with the Tax Court for
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4 Opinion of the Court 20-13902
“redetermination of the deficiency.” 26 U.S.C. § 6213(a). After a de-
ficiency is determined, the next step is “assessment,” which for-
mally places the taxpayer’s liability on the IRS’s books. Assessment
clears the way for a demand for payment and the eventual issuance
of a lien on the taxpayer’s property, or for collection via levy if he
still refuses to pay. See 26 U.S.C. §§ 6303(a), 6321, 6331.
Between 2005 and 2007, Burt Kroner failed to report just un-
der twenty-five million dollars in cash transfers from a former busi-
ness partner. The IRS began to investigate Kroner’s returns in 2008
and eventually concluded that the transfers should have been re-
ported as taxable income, a finding neither party disputes on ap-
peal.
On August 6, 2012, the tax examiner assigned to the case met
with Kroner’s representatives. At this meeting, the agent provided
Kroner with a letter and examination report detailing the IRS’s pro-
posed changes to his tax bill and asserting just under two million
dollars in Section 6662 penalties. The August 6 letter asked Kroner
to tell the IRS whether he agreed or disagreed with the proposed
changes. If Kroner disagreed, he could (1) provide the IRS with ad-
ditional information, (2) discuss the report with the examiner, (3)
discuss it instead with the examiner’s supervisor, or (4) request a
conference with the IRS’s Appeals Office. If Kroner took none of
those steps by August 16, the letter cautioned, the IRS would pro-
cess his case based on the report and issue him a statutory notice of
deficiency that would allow him to petition the Tax Court for re-
view.
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20-13902 Opinion of the Court 5
Kroner timely replied to the letter and continued to discuss
his case with the government for several months. Eventually, the
IRS sent Kroner a “30-day letter” and an updated examination re-
port. The updated report contained the same tax changes and pen-
alties as before, plus accrued interest. The new letter was signed by
the examiner’s immediate supervisor, Diane Acosta, and again ex-
plained Kroner’s options for agreeing or disagreeing with the pro-
posed changes to his taxes. If he disagreed, Kroner could either re-
quest a meeting with Acosta’s supervisor or a conference with the
Appeals Office. The new letter cautioned that if Kroner failed to
either respond or reach a settlement, he would receive a statutory
notice of deficiency detailing the process for obtaining Tax Court
review. The same day Acosta signed the 30-day letter, she also
signed a Civil Penalty Approval Form blessing the proposed penal-
ties.
Kroner requested a conference with the Appeals Office and
continued negotiating with the IRS. Despite his efforts, he never
reached a settlement. Over a year after it mailed him the 30-day
letter, the IRS finally issued Kroner a statutory notice of deficiency.
The notice explained that he had ninety days to file a petition with
the Tax Court challenging the alleged deficiency, including the pro-
posed penalties. Kroner timely petitioned, and the Tax Court took
up the dispute.
After a trial, the Tax Court sustained the IRS’s conclusion
that Kroner’s cash transfers were taxable but disallowed the pro-
posed penalties on procedural grounds. The court held that the IRS
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6 Opinion of the Court 20-13902
failed to show that it had obtained timely supervisory approval of
the penalties under Section 6751(b). Relying on its prior decisions
interpreting the supervisory approval requirement to impose a
compliance deadline at the time of the “initial determination” of a
penalty assessment, the Tax Court explained that this determina-
tion occurs “no later than when the Commissioner issues a revenue
agent’s report (RAR) to a taxpayer that proposes adjustments in-
cluding penalties and gives the taxpayer the right to protest those
proposed adjustments . . . with the Appeals Office.” Applying this
interpretation, the Tax Court held that the IRS’s August 6 letter
and examination report was the “initial determination” of Kroner’s
penalty assessment. Because Acosta did not sign a penalty approval
form until October 31, the Tax Court determined that the IRS had
violated Section 6751(b) by failing to obtain supervisory approval
in time. Thus, the court held that Kroner’s penalties were proce-
durally disallowed, a ruling that means that they can never be as-
sessed.
The IRS appealed, challenging the Tax Court’s interpreta-
tion of the supervisory approval requirement.
II.
We review the legal conclusions of the Tax Court, including
its interpretation of Section 6751(b), de novo. Kardash v. Comm’r.,
866 F.3d 1249, 1252 (11th Cir. 2017). Although we generally give
respectful consideration to the Tax Court’s decisions, those
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20-13902 Opinion of the Court 7
decisions do not bind us. See Dobson v. Comm’r., 320 U.S. 489,
499, 502 (1943).
III.
This appeal presents a question of first impression about Sec-
tion 6751(b). To answer these types of questions, we begin with the
statute’s text. That is often where we end as well. “[B]ecause where
the statutory language is clear and unambiguous, we ‘presume that
Congress said what it meant and meant what it said.’” United States
v. Chafin, 808 F.3d 1263, 1270 (11th Cir. 2015) (quoting United
States v. Browne, 505 F.3d 1229, 1250 (11th Cir. 2007)). “Indeed,
‘[o]ur inquiry must cease if the statutory language is unambiguous
and the statutory scheme is coherent and consistent.’” Id. (quoting
Med. Transp. Mgmt. Corp. v. Comm’r., 506 F.3d 1364, 1368 (11th
Cir. 2007)).
Turning to the statute’s text, we see that it regulates the pro-
cess of assessing tax penalties. The title of subsection (b) is
“[a]pproval of assessment.” The text provides that “[n]o penalty un-
der this title shall be assessed unless the initial determination of
such assessment is personally approved (in writing) by the imme-
diate supervisor of the individual making such determination . . . .”
26 U.S.C. § 6751(b)(emphasis added).
Kroner argues, citing a series of Tax Court decisions, that
the statute restricts communications between the IRS and a tax-
payer. The Tax Court has held that an initial determination of an
assessment is any “communication that advises the taxpayer that
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8 Opinion of the Court 20-13902
penalties will be proposed . . . .” Clay v. Commissioner, 152 T.C.
223, 249 (2019), aff’d on other grounds, 990 F.3d 1296 (11th Cir.
2021). And the Tax Court has also held that a supervisor must ap-
prove the communication before it is delivered. See id. Essentially,
the Tax Court reads the statute as follows: “No penalty shall be
communicated to a taxpayer until such communication has been
approved by the communicator’s immediate supervisor.”
We disagree with Kroner and the Tax Court. We conclude
that the IRS satisfies Section 6751(b) so long as a supervisor ap-
proves an initial determination of a penalty assessment before it as-
sesses those penalties. See Laidlaw’s Harley Davidson Sales, Inc. v.
Comm’r, 29 F.4th 1066, 1071 (9th Cir. 2022). Here, a supervisor ap-
proved Kroner’s penalties, and they have not yet been assessed. Ac-
cordingly, the IRS has not violated Section 6751(b).
We believe this is the best reading of the statute for three
reasons. First, we think it is more consistent with the meaning of
the phrase “initial determination of such assessment,” which is
what must be approved. Second, we think it reflects the absence of
any express timing requirement in the statute. And third, we think
it is a workable reading in the light of the statute’s purpose. We
address each reason in turn.
A.
With respect to “what” the statute requires a supervisor to
approve, we cannot equate an “initial determination of such assess-
ment” with communications about proposed penalties. “Every
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20-13902 Opinion of the Court 9
field of endeavor develops its own nomenclature,” and a “special-
ized meaning should be expected” when a text addresses a “tech-
nical subject.” ANTONIN SCALIA & BRYAN A. GARNER, READING
LAW: THE INTERPRETATION OF LEGAL TEXTS § 6, at 73 (2012)). Ac-
cordingly, when words have acquired a legal meaning, we presume
that they should be accorded that legal meaning. Royal Palm
Props., LLC v. Pink Palm Props., LLC, 38 F.4th 1372, 1376 (11th
Cir. 2022) (quoting Buckhannon Bd. & Care Home, Inc. v. W. Va.
Dep’t of Health & Human Res., 532 U.S. 598, 615–616 (2001)
(Scalia, J., concurring)).
In the context of the Internal Revenue Code, the word “as-
sess” has an established legal meaning: it is the act of recording a
taxpayer’s liability, including any applicable penalties, onto the
government’s books. Direct Mktg. Ass’n v. Brohl, 575 U.S. 1, 9
(2015); Hibbs v. Winn, 542 U.S. 88, 100 (2004); see also MICHAEL I.
SALTZMAN & LESLIE BOOK, IRS PRACTICE & PROCEDURE § 10.01
(June 2022 ed.). As the Supreme Court has recognized, an “‘assess-
ment’ is ‘essentially a bookkeeping notation.’” Hibbs, 542 U.S. at
100 (quoting Laing v. United States, 423 U.S. 161, 170, n. 13 (1976));
see 26 U.S.C. §§ 6203, 6303, 6321, 6331. That is, in the Tax Code,
an assessment means “little more than the calculation or recording
of a tax liability.” United States v. Galletti, 541 U.S. 114, 122 (2004);
see, e.g., 26 U.S.C. §§ 6203 (methods of assessment), 6213 (re-
strictions on assessment in cases subject to pre-assessment Tax
Court review), 6215 (assessment of deficiencies found by the Tax
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10 Opinion of the Court 20-13902
Court), 6851 (authorization of special income tax assessments upon
certain findings by the Secretary).
We presume that a word “bear[s] the same meaning
throughout a text.” CSX Corp. v. United States, 18 F.4th 672, 680
(11th Cir. 2021) (quoting SCALIA & GARNER, supra, § 25, at 170).
Thus, it seems to us that the word “assessment” should carry its
usual meaning in Section 6751(b)—the act of recording a tax liabil-
ity. It does not mean a “communication that advises the taxpayer
that penalties will be proposed.” Clay, 152 T.C. at 249; see
Laidlaw’s, 29 F.4th at 1072 (disagreeing with the Tax Court’s rule
in Clay); id. at 1076-77 & n. 3 (Berzon, J., dissenting) (same).
In fact, when Congress wanted to address communication
between the IRS and taxpayers in Section 6751, it did so explicitly.
Section 6751 has two subsections, each imposing a different proce-
dural requirement on the IRS. The first subsection requires that the
IRS provide a “computation” of a covered penalty as part of “each
notice of penalty under this title.” 26 U.S.C. § 6751(a). The sec-
ond—the one at issue in this case—concerns the “[a]pproval of as-
sessment” and requires the IRS to obtain supervisory approval of
“the initial determination of such assessment” before a covered
penalty is assessed. Id. § 6751(b). Congress could have required su-
pervisory approval of the notice of penalty. As it is, however, the
statute’s dual-track structure, with one subsection’s requirements
attaching to “notice[s] of penalty” and the other’s to “initial deter-
mination[s] of . . . assessment,” suggests that Congress meant for
notices of penalty and initial determinations of assessment to refer
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20-13902 Opinion of the Court 11
to different things. See Hamdan v. Rumsfeld, 548 U.S. 557, 578
(2006) (negative inference canon).
In the context of assessment’s specialized meaning, we think
the IRS makes a “determination of such assessment” when it con-
cludes that it has the authority and duty to assess penalties and re-
solves to do so. See Determination, MERRIAM-WEBSTER’S NINTH
NEW COLLEGIATE DICTIONARY (1986); Determination, MERRIAM-
WEBSTER’S COLLEGIATE DICTIONARY (10th ed. 1999); Determina-
tion, MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY (11th ed.
2012). The “initial” determination may differ depending on the pro-
cess the IRS uses to assess a penalty. See Initial, MERRIAM-WEB-
STER’S NINTH NEW COLLEGIATE DICTIONARY (1986) (“of or relating
to the beginning,” “placed at the beginning,” or “first”); Initial,
MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY (10th ed. 1999)
(same); Initial, MERRIAM-WEBSTER’S COLLEGIATE DICTIONARY
(11th ed. 2012) (same). But we are confident that the term “initial
determination of such assessment” has nothing to do with commu-
nication and everything to do with the formal process of calculat-
ing and recording an obligation on the IRS’s books.
B.
Having found no support for Kroner’s position in the “what”
of Section 6751(b), we turn to the related question of “when.”
Again, we start with the text. Section 6751(b) states that “[n]o pen-
alty . . . shall be assessed unless the initial determination of such
assessment is personally approved . . . .” 26 U.S.C. § 6751(b). As we
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12 Opinion of the Court 20-13902
have already explained, “assessed” refers to the ministerial function
of recording a taxpayer’s liability on the tax rolls, which is the last
step before the IRS can collect the tax or penalty. See 26 U.S.C. §
6203; 26 C.F.R. § 301.6203-1.
Kroner argues, and the Tax Court held, that an IRS supervi-
sor must approve the initial determination of assessment before
any penalty is communicated to the taxpayer. As the Ninth Circuit
has explained, “[t]he problem with [this] interpretation is that it has
no basis in the text of the statute.” Laidlaw’s, 29 F.4th at 1072. “The
statute does not make any reference to the communication of a
proposed penalty to the taxpayer . . . .” Id. at 1072. An initial deter-
mination of an assessment “and a communication to a taxpayer . .
. are two different things, and the statute addresses only the for-
mer.” Id. at 1072 n. 6.
We likewise see nothing in the text that requires a supervi-
sor to approve penalties at any particular time before assessment.
The word “unless” is the only connection between the restricted
activity—assessing—and the required procedure—approval. But
“unless” establishes a condition precedent. It means “except” or
“on the condition that.” See Unless, MERRIAM-WEBSTER’S NINTH
NEW COLLEGIATE DICTIONARY (1986); Unless, MERRIAM-WEB-
STER’S COLLEGIATE DICTIONARY (10th ed. 1999); Unless, MERRIAM-
WEBSTER’S COLLEGIATE DICTIONARY (11th ed. 2012). “Unless” re-
quires something, but it does not require that thing by a particular
time.
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20-13902 Opinion of the Court 13
Kroner points to the use of the word “initial” in “initial de-
termination of such assessment” as support for his timing argu-
ment. But reading the word “initial” to establish a timing deadline
for approval, and thus a timing restriction on assessment, smuggles
the word from one statutory clause to another. The statute pro-
vides that “[n]o penalty . . . shall be assessed unless the initial deter-
mination of such assessment is personally approved.” Stripped to
bare bones, the statute directs that the IRS shall not take action X
“unless” condition Y is met. X is the assessment of a covered pen-
alty, and Y is the act of obtaining supervisory approval of the initial
determination of assessment. The word “initial” modifies the
phrase “determination of such assessment,” all on the right side of
the “unless” and all concerned with what must be approved to sat-
isfy the statute’s condition. “Initial” does not modify the phrase “no
penalty under this title shall be assessed” on the opposite side of the
“unless,” which is the clause concerned with when in the process
of a tax investigation the statute restricts the IRS’s actions. In other
words, “initial” describes what must be approved, not when.
It may be wise for the IRS, as it currently does, to have a
supervisor approve proposed tax penalties at an early juncture—
long before they are assessed. But the text of the statute does not
impose an earlier deadline. 1
1 The IRS says that a timing requirement may arise from the statute’s use of
the word “approve” because a supervisor cannot “approve” something after
she has lost the discretion to disapprove it. See Laidlaw, 29 F.4th at 1072 (ac-
cepting this position). We need not address this nuance because it is
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14 Opinion of the Court 20-13902
C.
Finally, we believe the statute is workable without the Tax
Court’s communication-based pre-assessment deadline for super-
visory approval. The Tax Court developed this communication-
based understanding of Section 6751(b) in reliance on Chai v. Com-
missioner, 851 F.3d 190, 218–20 (2d Cir. 2017). Although the court
in Chai conceded that “[t]he provision contains no express require-
ment that the written approval be obtained at any particular time
prior to assessment,” id. at 218, it nonetheless established one.
Finding an ambiguity in the phrase “initial determination of such
assessment,” the court turned to the statute’s legislative history,
which it found reflected a purpose to prevent IRS agents from using
penalties as a bargaining chip during pre-assessment negotiations.
Based on that understanding of the legislative history, the court
reasoned that “the last moment the approval of the initial determi-
nation actually matters is immediately before the taxpayer files
suit” in the Tax Court and that the “truly consequential moment
of approval is the IRS’s issuance of the notice of deficiency.” Id. at
221. Therefore, with respect to penalties subject to Tax Court re-
view, the court held that Section 6751(b)(1) “requires written ap-
proval of the initial penalty determination no later than the date
the IRS issues the notice of deficiency . . . asserting such penalty.”
Id.undisputed that the supervisor had discretion when she approved the penalties
at issue here.
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20-13902 Opinion of the Court 15
We believe there are several problems with Kroner’s (and
by extension the Tax Court’s) reliance on Chai.
First, we think the Chai court missed an important aspect of
the statute’s purpose: it is not just about bargaining, it is also a
check on the imposition of erroneous penalties. A statute’s purpose
should be defined both “precisely” and “concretely.” SCALIA & GAR-
NER, supra, § 2, at 56–57. To that end, a court must evaluate statu-
tory purpose in terms of the full scope of a statute’s application. To
do any less risks “smuggl[ing] in the answer to the question before
the decision-maker” by focusing the inquiry on a particular area of
a statute’s domain, to the exclusion of all others. Id. § 2, at 56. Here,
supervisory review serves two functions: it ensures that penalties
are imposed only “where appropriate,” and it prevents penalties
from being used only as bargaining chips during negotiation. Sec-
tion 6751(b) serves its first function so long as a supervisor approves
a penalty before the assessment is made; there is no need to set an
earlier deadline. But the court in Chai did not discuss this first pur-
pose at all. See King v. Burwell, 576 U.S. 473, 512 (2015) (Scalia, J.,
dissenting) (“[I]t is no more appropriate to consider one of a stat-
ute’s purposes in isolation than it is to consider one of its words
that way.”).
The court in Chai may have missed this purpose by focusing
exclusively on penalties that are subject to Tax Court review. As
the court noted, those penalties receive a far more thorough pre-
assessment appropriateness review in the Tax Court than a single
supervisor is likely to give them under Section 6751(b). See Chai,
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16 Opinion of the Court 20-13902
851 F.3d at 219 (reasoning that “[i]f deficiency proceeding review
of penalty determinations were sufficient to deter or detect the
IRS’s improper leveraging of undue penalties, then Congress
would not have felt compelled to enact” Section 6751(b)). But, alt-
hough this case and Chai concern penalties subject to review in the
Tax Court, other penalties covered by Section 6751(b) cannot be
challenged in the Tax Court. See Graev v. Comm’r., 149 T.C. 485,
517–19 (2017) (Holmes, J., concurring in the result only). Compare
26 U.S.C. §§ 6672–6725 (providing for so-called “assessable penal-
ties”), with id. §§ 6211–16 (cabining pre-assessment Tax Court re-
view to taxes subject to the deficiency process and related penal-
ties). As to these “assessable” penalties, Section 6751(b) provides a
singularly important pre-assessment appropriateness check on an
IRS agent’s decision to assert a penalty—supervisory sign-off. See
generally Laidlaw’s, 29 F.4th 1066 (applying the statute to an as-
sessable penalty without pre-assessment Tax Court review). There
is thus every reason to think that this benefit is one of the statute’s
purposes. And, as to both “assessable” and non-assessable penalties,
Section 6751(b) gives taxpayers the benefit of this additional safe-
guard so long as a supervisor approves before the assessment is
made.
Second, we do not think the statute needs a pre-assessment
deadline to reduce the use of improper penalties as “bargaining
chip[s].” Chai, 851 F.3d at 219 (quoting S. Rep. No. 105-174, at 65
(1998)). The Chai court understood Section 6751(b)’s purpose to be
about policing pre-assessment settlement negotiations. See id. at
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20-13902 Opinion of the Court 17
219–20. But negotiations do not end after a penalty is assessed. In-
deed, the IRS’s probable next steps, issuing a tax lien and collecting
via levy, provide taxpayers access to administrative and judicial
remedies that may encourage the parties to continue negotiating
long after assessment. See 26 U.S.C. §§ 6303(a), 6320(c), 6321,
6330(c), 6331. And a taxpayer may decide to pay the penalty as-
serted and then sue the government for a refund, resulting in a sep-
arate but related set of negotiations. Id. § 7422. Accordingly, to the
extent a supervisor’s approval prevents penalties from being im-
posed only as “bargaining chips,” the statute works without a pre-
assessment deadline for securing that approval.
But even assuming the Chai court was correct to focus on
pre-assessment bargaining, Section 6751(b) still affects those nego-
tiations without a pre-assessment deadline. Because of Section
6751(b), agents and taxpayers know during the pre-assessment ne-
gotiation process that an agent needs his supervisor’s approval be-
fore any proposed penalty can be assessed. And any supervisor who
approves an improper penalty—no matter when—will be on the
record as approving the penalty just the same. The statute thus in-
centivizes supervisory involvement at an early stage in the negoti-
ation process and disincentives agents from proposing improper
penalties solely for the sake of negotiations. For these reasons, the
court in Chai recognized in passing that, even when an agent does
not obtain a written approval before communicating a penalty to a
taxpayer, the statute can still have “its intended effect.” Chai, 851
F.3d at 220. A different statute, one drafted to include a pre-
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18 Opinion of the Court 20-13902
assessment deadline attaching to mere communications, would
also affect the pre-assessment negotiation process. But that feature
is not a prerequisite for the statute to function.
Finally, very few statutes pursue one purpose to the exclu-
sion of all others, and we see no reason to make Section 6751(b) an
exception. Although the legislative history suggests a desire to
avoid the use of inappropriate penalties as bargaining chips, it also
suggests that penalties “should . . . be imposed where appropriate.”
Chai, 851 F.3d at 219. In other words, Congress balanced two im-
portant governmental interests in enacting Section 6751(b). On the
one hand, inappropriate penalties should not be imposed or used
as bargaining chips. On the other, appropriate penalties should be
assessed and collected. Chai’s analysis of these competing interests
leaned heavily on the former to the detriment of the latter when
justifying its departure from the statutory text. And the Tax Court’s
rule requiring early supervisor sign-off prevents the IRS from as-
sessing penalties that the Tax Court itself has otherwise found to
be warranted. We are not persuaded that the statute requires this
anomalous result.
IV.
The Tax Court improperly concluded that Kroner’s penal-
ties were procedurally invalid for failure to comply with Section
6751(b). The portion of the Tax Court’s order disallowing Kroner’s
penalties is REVERSED.
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20-13902 Newsom, J., Concurring 1
NEWSOM, Circuit Judge, concurring:
I concur in the Court’s judgment and join its opinion. I write
separately simply to underscore the perils of attempting to inter-
pret statutes by reference to legislative history or their purported
“purposes” more generally.
Parts III.A and III.B of the Court’s opinion amply demon-
strate that the Tax Court’s interpretation of 26 U.S.C. § 6751(b) has
no footing in the statutory text. That, to my mind, is sufficient rea-
son to reverse. More generous than I might have been, the Court
proceeds in Part III.C to consider—and then correctly reject—the
suggestion that the Tax Court’s decision might find some support
in § 6751(b)’s supposed purpose, as divined from its legislative his-
tory.
The Court’s persuasive takedown of the Tax Court’s atex-
ual, purposive reading highlights the pitfalls of intent-driven statu-
tory interpretation. As is so often the case, the legislative history
here is a grab-bag. As the Court notes, the Tax Court came to its
view of § 6751(b) in reliance on the Second Circuit’s decision in
Chai v. Commissioner, 851 F.3d 190 (2d Cir. 2017), which, in turn,
relied on a passage of a Senate Report suggesting that the provision
was meant to ensure that “penalties should only be imposed where
appropriate and not as a bargaining chip.” Id. at 219 (quoting S.
Rep. No. 105-174, at 65 (1998)). Based on the Report’s “bargaining
chip” reference, the Second Circuit—and the Tax Court here—
concluded that written supervisory approval must precede the date
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2 Newsom, J., Concurring 20-13902
on which the IRS initially issues a notice of deficiency. See Chai,
851 F.3d at 219-21.
Here’s the problem, and it’s an evergreen: Without much
effort, one can mine from § 6751(b)’s legislative history other—and
sometimes conflicting—congressional “purposes.” For one, as the
Court notes, perhaps the statute’s overriding concern was simply
ensuring accuracy by requiring managerial review of the determi-
nation made by a lone revenue agent at the bottom of the IRS to-
tem pole. See S. Rep. No. 105-174, at 65 (“The Committee believes
that penalties should only be imposed where appropriate . . . .”);
Maj. Op. at 15–16. For another, it may be, as the Commissioner
has contended, that just having the law on the books deters rogue
revenue agents from threatening penalties as a “bargaining chip.”
For yet another, it could be that the Senate Report’s “bargaining
chip” language doesn’t relate to the supervisory-approval require-
ment at all. As the Report itself emphasizes, before the adoption
of § 6751(a)—which was enacted alongside § 6751(b)—the Tax
Code did “not require the IRS to show how penalties [were] com-
puted on the notice of penalty.” S. Rep. No. 105-174, at 65; see also
26 U.S.C. § 6751(a) (“The Secretary shall include with each notice
of penalty under this title information with respect to the name of
the penalty, the section of this title under which the penalty is im-
posed, and a computation of the penalty.”). Maybe, then, it was
§ 6751’s new notice requirement—not its approval requirement—
that Congress hoped might prevent the weaponization of penalties.
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20-13902 Newsom, J., Concurring 3
Armed with appropriate notice, a taxpayer could review the exam-
iner’s work and call “baloney” on unjustified penalties.
All of which is to say, yet again here, what I’ve said before
elsewhere: The legislative history—even if we consider it—is “ut-
terly unenlightening.” Oak Grove Res., LLC v. Director, OWCP,
920 F.3d 1283, 1292 n.6 (11th Cir. 2019). “Hence [my] quaint”—
and continuing—“fixation on [the] enacted text.” Id.