Laidlaw's Harley Davidson Sales, Inc. v. Commissioner, 154 T.C. 68

Petitioner Laidlaw’s Harley Davidson Sales, Inc. (LHDS), a C corporation, failed to include a Form 8886 disclosure for participation in the Sterling Benefit Plan on its May 31, 2008 Form 1120; it later submitted amended Forms 8886 in December 2010.
Revenue Agent (RA) Sandra Czora prepared a revenue agent’s report (RAR) and issued a 30-day letter on May 26, 2011, formally proposing assessment of an IRC §6707A penalty for failure to disclose the reportable transaction; the letter and attachments were signed only by the RA.
LHDS timely requested Appeals consideration and submitted a written protest; the RA’s immediate supervisor, Group Manager Virginia Korzec, signed a Form 300 (Civil Penalty Approval Form) on August 23, 2011—almost three months after the 30-day letter.
Appeals reviewed the case, sustained the penalty, and the IRS assessed the §6707A penalty (later mostly abated, leaving $10,000). A levy notice prompted a collection due process (CDP) hearing; Appeals issued a notice of determination sustaining the levy.
LHDS petitioned the Tax Court, moved for summary judgment, and argued the IRS failed to obtain the written supervisory approval required by I.R.C. §6751(b)(1) before the initial formal communication proposing the penalty.
The Tax Court held §6751(b)(1) applies to the assessable §6707A penalty and that supervisory approval was required before the 30-day letter; because approval came later, Appeals abused its discretion in verifying compliance.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether §6751(b)(1)'s written supervisory approval requirement applies to assessable penalties under §6707A	§6751(b)(1) applies to §6707A so written supervisory approval was required	§6751(b)(1) does not bar application to §6707A; IRS argues timing requirement is only before assessment	Court: §6751(b)(1) applies to §6707A penalties
When approval must be obtained—before first formal communication (30-day letter) or merely before assessment	Approval must precede the initial formal communication proposing the penalty (e.g., 30-day letter)	Approval is timely if obtained before assessment; supervisor need only retain discretion up to assessment	Court: Approval required before the first formal communication proposing the penalty (30-day letter)
Whether the 30-day letter/RAR constituted the "initial determination" for §6751(b)(1) purposes	30-day letter + RAR embodied the initial determination	IRS argued approval timing wrt assessment mattered, not the initial communication	Court: 30-day letter with RAR was the initial determination triggering §6751(b)(1)
Whether Appeals properly verified compliance with law/procedure under §6330(c)(1)	Appeals failed verification because supervisory approval came after the 30-day letter	Appeals asserted approval existed before assessment so verification satisfied	Court: Appeals abused discretion; verification was improper because §6751(b)(1) not satisfied

Clay v. Commissioner, 152 T.C. 223 (Tax Ct. 2019) (holding issuance of RAR and 30-day letter can constitute an initial determination triggering §6751(b)(1))
Graev v. Commissioner, 149 T.C. 485 (Tax Ct. 2017) (discussing §6751(b)(1) applicability to penalties and burden when approval absent)
Chai v. Commissioner, 851 F.3d 190 (2d Cir. 2017) (interpreting legislative history and timing considerations of §6751(b)(1))
ATL & Sons Holdings, Inc. v. Commissioner, 152 T.C. 138 (Tax Ct. 2019) (applying §6751(b)(1) in a CDP context)
Palmolive Bldg. Inv’rs, LLC v. Commissioner, 152 T.C. 75 (Tax Ct. 2019) (applying §6751(b)(1) in partnership/TEFRA context)
Our Country Home Enters., Inc. v. Commissioner, 145 T.C. 1 (Tax Ct. 2015) (addressing listed-transaction characterization relevant to §6707A exposure)