No lien release for a shelter promoter because the section 6707 penalties were validly approved

Plain-English summary

A promoter of a "Son-of-BOSS" tax shelter had been hit with penalties under section 6707 for failing to disclose the shelter, and federal tax liens secured those penalties. The promoter asked the IRS to release the liens, arguing the penalties were invalid because the IRS failed to get proper written supervisory approval as section 6751(b) requires. In this Chief Counsel email advice, the attorneys explain that a lien is released only when the underlying liability is satisfied (paid or abated) or becomes unenforceable because the collection period expired. They conclude the section 6707 penalties were validly approved: the revenue agent got written supervisory sign-off before the 30-day letter, and the Tax Court has repeatedly held that section 6751(b) approval need not take any particular form (emails can suffice). Because there was no section 6751(b) defect, there is no basis to abate the penalties, so the liens should not be released. The advice adds that if some other reason later leads to abatement, the liens would then be released. This matters because it shows the IRS will not release liens merely on a taxpayer's assertion of a paperwork defect, and it collects the case law on what counts as valid written penalty approval.

Ruling snapshot

• Question: Should the IRS release federal tax liens securing section 6707 penalties on the ground that the penalties failed section 6751(b)'s written-supervisory-approval requirement?
• Outcome: Advice (do not release the liens; the section 6751(b) approval was valid, so there is no basis to abate the penalties)
• Key authorities: IRC § 6325(a); § 6707; § 6751(b); § 6502; Treas. Reg. § 301.6325-1(a)(4); Belair Woods, LLC v. Commissioner, 154 T.C. 1 (2020)

Full text (IRS public release)

ID: CCA_2021091317354796
UILC: 6325.00-00

Number: 202204008
Release Date: 1/28/2022
From: ---------------------
Sent: Monday, September 13, 2021 5:35:47 PM
To: --------------------
Cc: -----------------------------------------------------------------------
Bcc:
Subject: RE: Request for Review of Proposed Advice to Collection: Son-of-BOSS Promoter Request for
Release of Liens (re: Section 6707 Penalties for Failing to Disclose Shelters) Based on Purported Non-
Compliance with Section 6751(b) -

Good afternoon.

PA has one comment on the memo.

With regard to releasing the liens, you state:

     As you know, releases of lien relate only to situations where the underlying
     liability has been satisfied or has become unenforceable due to lapse of time,
     i.e., expiration of the collection statute. See I.R.C. § 6325(a); IRM 5.12.3.3,
     5.12.3.4. Because the penalties have neither been satisfied nor expired due to
     the expiration of the collection statute under I.R.C. § 6502, we recommend that
     you notify ------------that a certificate of release cannot be issued.

In our view, this needs to be clarified. As you note, the Code requires release where
the underlying liability has been satisfied or has become unenforceable due to lapse of
time. The Treasury Regulations provide that the liability is satisfied when the Service
determines the entire liability listed in a NFTL has been satisfied or the taxpayer
provides proof of payment. See Treas. Reg. 301.6325-1(a)(4). Per the IRM, the
satisfaction of liability criteria for releasing liens includes both payment of the liability
and abatement of the liability. See, e.g., IRM 5.12.3.3.1; 5.12.3.3.1.2; 5.12.3.9;
5.12.3.9.1.

Therefore, if the assessment of the section 6707 penalties were improper, and it were
abated, then the liens should be released. The taxpayer has asserted that the Service
failed to comply with section 6751(b). Based on the information provided, in our
opinion, the Service did not fail to comply with section 6751(b), and therefore the
purported non-compliance with section 6751(b) is not a basis to challenge the validity of
the section 6707 penalties. The IRM instructs LB&I and SB/SE employees regarding the
preferred form of written supervisory approval of penalties. But the Tax Court has
specifically held that compliance with section 6751(b) does not require written
supervisory approval in any particular form, and that “[e]mails may constitute written
2

supervisory approval.” Est. of Morrissette v. Commissioner, T.C. Memo. 2021-60 at
119; Rogers v. Commissioner, T.C. Memo. 2019-61 at 25 (finding that Associate Area
Counsel emails satisfied § 6751(b)) (citation omitted); see also Belair Woods, LLC v.
Commissioner, 154 T.C. 1, 17 (2020) (“[T]he written supervisory approval requirement
requires just that: written supervisory approval.”); Trib. Media Co. v. Commissioner, T.C.
Memo. 2020-2 at *20-21 (“Although the IRS has various forms that can be used for
approving penalties, courts have not restricted the Commissioner to using only those
forms in order to comply with the written approval requirement.”). Unlike in Laidlaw’s
Harley Davidson Sales, Inc., where there was nothing in the record to reflect that the
Revenue Agent’s supervisor had approved the section 6707 penalty in writing before
the 30-day letter was issued to the taxpayer, here the Revenue Agent received written
supervisory approval of his report recommending section 6707 penalties before he
issued the 30-day letter. Accordingly, even though the written supervisory approval did
not take the form recommended in the IRM guidance, it meets the statutory requirement
of written approval.

If not section 6751(b), but some other reason results in abating the penalties, then in
conjunction with the abatement, the federal tax liens would be released. But at this
juncture, there is no reason to release the liens.

As an aside, you may wish to correct the spelling of the taxpayer’s name in the title of
the Word file. Doing so may facilitate locating the electronic Word document in the
future.

If you have questions or comments, please contact us.