CCA 201226028: Section 6038D penalty is assessable without deficiency procedures

Plain-English summary

Chief Counsel advice concluded that the penalty under IRC § 6038D is not itself part of a deficiency. IRC §§ 6665 and 6671 can bring some penalties within deficiency procedures when they are calculated based on a tax subject to those procedures, but their chapter 68 language does not expressly cover § 6038D. The advice further concluded that the § 6038D penalty is set at specific statutory amounts rather than calculated from a tax subject to deficiency procedures, so the IRS may assess it without first following those procedures.

Ruling snapshot

• Question: May the IRS assess the IRC § 6038D penalty without first following deficiency procedures?
• Outcome: Advice
• Key authorities: IRC §§ 6038D, 6665, 6671, and 6110

Full text (IRS public release)

ID: CCA_2012042714292464 Number: 201226028
Release Date: 6/29/2012
Office: --------------
UILC: 6665.02-00, 6671.00-00

From: ------------------
Sent: Friday, April 27, 2012 2:29:24 PM
To: ----------------------------------------------
Cc: ---------------------------------------------------------------------------------------------------------------------------
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Subject: FW: 8938 Penalty Question

The section 6038D penalty is not itself part of a deficiency - so it cannot be subject to deficiency procedures on that ground. Sections 6665 and 6671 operate to treat some penalties as subject to deficiency procedures if they are calculated on the basis of a tax that is itself subject to deficiency procedures. These Code sections contain language that refers only to penalties in chapter 68 (or subchapter B of chapter 68), so that they do not expressly cover the penalty in section 6038D. Even if they did extend to that penalty, however, the section 6038D penalty is not calculated on the basis of a tax that is itself subject to deficiency procedures; instead, the penalty is in specific amounts set forth in the statute. As a result, the section 6038D penalty is assessable by the Service without following deficiency procedures first.