In the early 1980’s, Congress became concerned with the rapid growth of deliberate defiance of the tax laws by taxpayers objecting to the payment of tax on frivolous grounds or through reliance on obviously unsupportable tax positions. As a result, Congress passed Internal Revenue Code (IRC) § 6702, which, as currently formulated, generally imposes an immediately assessable $5,000 penalty on tax returns adopting a position that the IRS has identified as frivolous or reflecting a desire to delay or impede the administration of Federal tax laws. This penalty, however, was primarily intended to address “protest” returns and was not aimed at taxpayers who were unintentionally non-compliant, such as in the case of innocent mathematical or clerical errors. The goal was to establish a regime that discouraged obstructive returns, but not one that adopted punitive measures against potentially good-faith taxpayers.

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