IRS Authorized to Recover Foreign Reporting Penalty Without Suit

The IRS can assess penalties on taxpayers who willfully fail to file certain disclosures of their interest in foreign corporations without filing a civil suit, the D.C. Circuit ruled Friday.

The panel’s decision reverses the US Tax Court, which concluded in April 2023 that the agency lacked authority to collect failure-to-report penalties under IRC Section 6038 because it wasn’t expressly authorized. The IRS sought review from the US Court of Appeals for the D.C. Circuit, arguing the Tax Court’s interpretation created inconsistencies in the tax code and ignored another statute, Section 6201(a), which authorized the agency’s action.

The IRS ...