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119th Congress

Title 26 — Internal Revenue Code

Part II · Chapter 68 — Additions to the Tax, Additional Amounts, and Assessable Penalties

§ 6662. Imposition of accuracy-related penalty on underpayments

Statutory text

(a)

Imposition of penalty

If this section applies to any portion of an underpayment of tax required to be shown on a return, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which this section applies.

(b)

Portion of underpayment to which section applies

This section shall apply to the portion of any underpayment which is attributable to 1 or more of the following:

(1)

Negligence or disregard of rules or regulations.

(2)

Any substantial understatement of income tax.

(3)

Any substantial valuation misstatement under chapter 1.

(4)

Any substantial overstatement of pension liabilities.

(5)

Any substantial estate or gift tax valuation understatement.

(6)

Any disallowance of claimed tax benefits by reason of a transaction lacking economic substance (within the meaning of section 7701(o)) or failing to meet the requirements of any similar rule of law.

(7)

Any undisclosed foreign financial asset understatement.

(8)

Any inconsistent estate basis.

(9)

Any overstatement of the deduction provided in section 170(p).

(10)

Any disallowance of a deduction by reason of section 170(h)(7).

This section shall not apply to any portion of an underpayment on which a penalty is imposed under section 6663. Except as provided in paragraph (1) or (2)(B) of section 6662A(e), this section shall not apply to the portion of any underpayment which is attributable to a reportable transaction understatement on which a penalty is imposed under section 6662A.

(c)

Negligence

For purposes of this section, the term “negligence” includes any failure to make a reasonable attempt to comply with the provisions of this title, and the term “disregard” includes any careless, reckless, or intentional disregard.

(d)

Substantial understatement of income tax

(1)

Substantial understatement

(A)

In general

For purposes of this section, there is a substantial understatement of income tax for any taxable year if the amount of the understatement for the taxable year exceeds the greater of—

(i)

10 percent of the tax required to be shown on the return for the taxable year, or

(ii)

$5,000.

(B)

Special rule for corporations

In the case of a corporation other than an S corporation or a personal holding company (as defined in section 542), there is a substantial understatement of income tax for any taxable year if the amount of the understatement for the taxable year exceeds the lesser of—

(i)

10 percent of the tax required to be shown on the return for the taxable year (or, if greater, $10,000), or

(ii)

$10,000,000.

(C)

Special rule for taxpayers claiming section 199A deduction

In the case of any taxpayer who claims any deduction allowed under section 199A for the taxable year, subparagraph (A) shall be applied by substituting “5 percent” for “10 percent”.

(2)

Understatement

(A)

In general

For purposes of paragraph (1), the term “understatement” means the excess of—

(i)

the amount of the tax required to be shown on the return for the taxable year, over

(ii)

the amount of the tax imposed which is shown on the return, reduced by any rebate (within the meaning of section 6211(b)(2)).

The excess under the preceding sentence shall be determined without regard to items to which section 6662A applies.

(B)

Reduction for understatement due to position of taxpayer or disclosed item

The amount of the understatement under subparagraph (A) shall be reduced by that portion of the understatement which is attributable to—

(i)

the tax treatment of any item by the taxpayer if there is or was substantial authority for such treatment, or

(ii)

any item if—

(I)

the relevant facts affecting the item’s tax treatment are adequately disclosed in the return or in a statement attached to the return, and

(II)

there is a reasonable basis for the tax treatment of such item by the taxpayer.

For purposes of clause (ii)(II), in no event shall a corporation be treated as having a reasonable basis for its tax treatment of an item attributable to a multiple-party financing transaction if such treatment does not clearly reflect the income of the corporation.

(C)

Reduction not to apply to tax shelters

(i)

In general

Subparagraph (B) shall not apply to any item attributable to a tax shelter.

(ii)

Tax shelter

For purposes of clause (i), the term “tax shelter” means—

(I)

a partnership or other entity,

(II)

any investment plan or arrangement, or

(III)

any other plan or arrangement,

 if a significant purpose of such partnership, entity, plan, or arrangement is the avoidance or evasion of Federal income tax.

(3)

Secretarial list

The Secretary may prescribe a list of positions which the Secretary believes do not meet 1 or more of the standards specified in paragraph (2)(B)(i), section 6664(d)(3), and section 6694(a)(1). Such list (and any revisions thereof) shall be published in the Federal Register or the Internal Revenue Bulletin.

(e)

Substantial valuation misstatement under chapter 1

(1)

In general

For purposes of this section, there is a substantial valuation misstatement under chapter 1 if—

(A)

the value of any property (or the adjusted basis of any property) claimed on any return of tax imposed by chapter 1 is 150 percent or more of the amount determined to be the correct amount of such valuation or adjusted basis (as the case may be), or

(B)
(i)

the price for any property or services (or for the use of property) claimed on any such return in connection with any transaction between persons described in section 482 is 200 percent or more (or 50 percent or less) of the amount determined under section 482 to be the correct amount of such price, or

(ii)

the net section 482 transfer price adjustment for the taxable year exceeds the lesser of $5,000,000 or 10 percent of the taxpayer’s gross receipts.

(2)

Limitation

No penalty shall be imposed by reason of subsection (b)(3) unless the portion of the underpayment for the taxable year attributable to substantial valuation misstatements under chapter 1 exceeds $5,000 ($10,000 in the case of a corporation other than an S corporation or a personal holding company (as defined in section 542)).

(3)

Net section 482 transfer price adjustment

For purposes of this subsection—

(A)

In general

The term “net section 482 transfer price adjustment” means, with respect to any taxable year, the net increase in taxable income for the taxable year (determined without regard to any amount carried to such taxable year from another taxable year) resulting from adjustments under section 482 in the price for any property or services (or for the use of property).

(B)

Certain adjustments excluded in determining threshold

For purposes of determining whether the threshold requirements of paragraph (1)(B)(ii) are met, the following shall be excluded:

(i)

Any portion of the net increase in taxable income referred to in subparagraph (A) which is attributable to any redetermination of a price if—

(I)

it is established that the taxpayer determined such price in accordance with a specific pricing method set forth in the regulations prescribed under section 482 and that the taxpayer’s use of such method was reasonable,

(II)

the taxpayer has documentation (which was in existence as of the time of filing the return) which sets forth the determination of such price in accordance with such a method and which establishes that the use of such method was reasonable, and

(III)

the taxpayer provides such documentation to the Secretary within 30 days of a request for such documentation.

(ii)

Any portion of the net increase in taxable income referred to in subparagraph (A) which is attributable to a redetermination of price where such price was not determined in accordance with such a specific pricing method if—

(I)

the taxpayer establishes that none of such pricing methods was likely to result in a price that would clearly reflect income, the taxpayer used another pricing method to determine such price, and such other pricing method was likely to result in a price that would clearly reflect income,

(II)

the taxpayer has documentation (which was in existence as of the time of filing the return) which sets forth the determination of such price in accordance with such other method and which establishes that the requirements of subclause (I) were satisfied, and

(III)

the taxpayer provides such documentation to the Secretary within 30 days of request for such documentation.

(iii)

Any portion of such net increase which is attributable to any transaction solely between foreign corporations unless, in the case of any such corporations, the treatment of such transaction affects the determination of income from sources within the United States or taxable income effectively connected with the conduct of a trade or business within the United States.

(C)

Special rule

If the regular tax (as defined in section 55(c)) imposed by chapter 1 on the taxpayer is determined by reference to an amount other than taxable income, such amount shall be treated as the taxable income of such taxpayer for purposes of this paragraph.

(D)

Coordination with reasonable cause exception

For purposes of section 6664(c) the taxpayer shall not be treated as having reasonable cause for any portion of an underpayment attributable to a net section 482 transfer price adjustment unless such taxpayer meets the requirements of clause (i), (ii), or (iii) of subparagraph (B) with respect to such portion.

(f)

Substantial overstatement of pension liabilities

(1)

In general

For purposes of this section, there is a substantial overstatement of pension liabilities if the actuarial determination of the liabilities taken into account for purposes of computing the deduction under paragraph (1) or (2) of section 404(a) is 200 percent or more of the amount determined to be the correct amount of such liabilities.

(2)

Limitation

No penalty shall be imposed by reason of subsection (b)(4) unless the portion of the underpayment for the taxable year attributable to substantial overstatements of pension liabilities exceeds $1,000.

(g)

Substantial estate or gift tax valuation understatement

(1)

In general

For purposes of this section, there is a substantial estate or gift tax valuation understatement if the value of any property claimed on any return of tax imposed by subtitle B is 65 percent or less of the amount determined to be the correct amount of such valuation.

(2)

Limitation

No penalty shall be imposed by reason of subsection (b)(5) unless the portion of the underpayment attributable to substantial estate or gift tax valuation understatements for the taxable period (or, in the case of the tax imposed by chapter 11, with respect to the estate of the decedent) exceeds $5,000.

(h)

Increase in penalty in case of gross valuation misstatements

(1)

In general

To the extent that a portion of the underpayment to which this section applies is attributable to one or more gross valuation misstatements, subsection (a) shall be applied with respect to such portion by substituting “40 percent” for “20 percent”.

(2)

Gross valuation misstatements

The term “gross valuation misstatements” means—

(A)

any substantial valuation misstatement under chapter 1 as determined under subsection (e) by substituting—

(i)

in paragraph (1)(A), “200 percent” for “150 percent”,

(ii)

in paragraph (1)(B)(i)—

(I)

“400 percent” for “200 percent”, and

(II)

“25 percent” for “50 percent”, and

(iii)

in paragraph (1)(B)(ii)—

(I)

“$20,000,000” for “$5,000,000”, and

(II)

“20 percent” for “10 percent”.

(B)

any substantial overstatement of pension liabilities as determined under subsection (f) by substituting “400 percent” for “200 percent”,

(C)

any substantial estate or gift tax valuation understatement as determined under subsection (g) by substituting “40 percent” for “65 percent”, and

(D)

any disallowance of a deduction described in subsection (b)(10).

(i)

Increase in penalty in case of nondisclosed noneconomic substance transactions

(1)

In general

In the case of any portion of an underpayment which is attributable to one or more nondisclosed noneconomic substance transactions, subsection (a) shall be applied with respect to such portion by substituting “40 percent” for “20 percent”.

(2)

Nondisclosed noneconomic substance transactions

For purposes of this subsection, the term “nondisclosed noneconomic substance transaction” means any portion of a transaction described in subsection (b)(6) with respect to which the relevant facts affecting the tax treatment are not adequately disclosed in the return nor in a statement attached to the return.

(3)

Special rule for amended returns

In no event shall any amendment or supplement to a return of tax be taken into account for purposes of this subsection if the amendment or supplement is filed after the earlier of the date the taxpayer is first contacted by the Secretary regarding the examination of the return or such other date as is specified by the Secretary.

(j)

Undisclosed foreign financial asset understatement

(1)

In general

For purposes of this section, the term “undisclosed foreign financial asset understatement” means, for any taxable year, the portion of the understatement for such taxable year which is attributable to any transaction involving an undisclosed foreign financial asset.

(2)

Undisclosed foreign financial asset

For purposes of this subsection, the term “undisclosed foreign financial asset” means, with respect to any taxable year, any asset with respect to which information was required to be provided under section 6038, 6038B, 6038D, 6046A, or 6048 for such taxable year but was not provided by the taxpayer as required under the provisions of those sections.

(3)

Increase in penalty for undisclosed foreign financial asset understatements

In the case of any portion of an underpayment which is attributable to any undisclosed foreign financial asset understatement, subsection (a) shall be applied with respect to such portion by substituting “40 percent” for “20 percent”.

(k)

Inconsistent estate basis reporting

For purposes of this section, the term “inconsistent estate basis” means any portion of an underpayment attributable to the failure to comply with section 1014(f).

(l)

Increase in penalty in case of overstatement of qualified charitable contributions

In the case of any portion of an underpayment which is attributable to one or more overstatements of the deduction provided in section 170(p), subsection (a) shall be applied with respect to such portion by substituting “50 percent” for “20 percent”.

(m)

Substantial understatement of income tax due to disallowance of applicable energy credits

(1)

In general

In the case of a taxpayer for which there is a disallowance of an applicable energy credit for any taxable year, for purposes of determining whether there is a substantial understatement of income tax for such taxable year, subsection (d)(1) shall be applied—

(A)

in subparagraphs (A) and (B), by substituting “1 percent” for “10 percent” each place it appears, and

(B)

without regard to subparagraph (C).

(2)

Disallowance of an applicable energy credit

For purposes of this subsection, the term “disallowance of an applicable energy credit” means the disallowance of a credit under section 45X, 45Y, or 48E by reason of overstating the material assistance cost ratio (as determined under section 7701(a)(52)) with respect to any qualified facility, energy storage technology, or facility which produces eligible components.

Legislative history

Reconstructed from this section’s Code source credit and amendment notes, resolved against the local Statutes at Large. Editorial notes are evidence, not the law that made the change.

  1. Improved Penalty Administration and Compliance Tax Act

    Pub. L. 101–239 title VII § 7721(a) · 103 Stat. 2106

    Enacted · 26 U.S.C. § 6662

    Added Pub. L. 101–239, title VII, § 7721(a), Dec. 19, 1989, 103 Stat. 2395

    Source evidence

    Code source credit
    Added Pub. L. 101–239, title VII, § 7721(a), Dec. 19, 1989, 103 Stat. 2395

    Enacted provision · exact public law section
    (a) General Rule.— Subchapter A of chapter 68 (relating to additions to the tax and additional amounts) is amended by striking section 6662 and inserting the following: “PART II— ACCURACY-RELATED AND FRAUD PENALTIES “Sec. 6662. Imposition of accuracy-related penalty. “Sec. 6663. Imposition of fraud penalty. “Sec. 6664. Definitions and special rules. “SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY. “(a) Imposition of Penalty.— If this section applies to any portion of an underpayment of tax required to be shown on a return, there shall be added to the tax an amount equal to 20 percent of the portion of the underpayment to which this section applies. “(b) Portion of Underpayment to Which Section Applies.— This section shall apply to the portion of any underpayment which is attributable to 1 or more of the following: “(1) Negligence or disregard of rules or regulations. “(2) Any substantial understatement of income tax. “(3) Any substantial valuation overstatement under chapter 1. “(4) Any substantial overstatement of pension liabilities. “(5) Any substantial estate or gift tax valuation understatement. This section shall not apply to any portion of an underpayment on which a penalty is imposed under section 6663. “(c) Negligence.— For purposes of this section, the term ‘negligence’ includes any failure to make a reasonable attempt to comply with the provisions of this title, and the term ‘disregard’ includes any careless, reckless, or intentional disregard. “(d) Substantial Understatement of Income Tax.— “(1) Substantial understatement.— “(A) In general.— For purposes of this section, there is a substantial understatement of income tax for any taxable year if the amount of the understatement for the taxable year exceeds the greater of— “(i) 10 percent of the tax required to be shown on the return for the taxable year, or “(ii) $5,000. “(B) Special rule for corporations.— In the case of a corporation other than an S corporation or a personal holding company (as defined in section 542), paragraph (1) shall be applied by substituting “$10,000” for “$5,000”. “(2) Understatement.— “(A) In general.— For purposes of paragraph (1), the term ‘understatement’ means the excess of— “(i) the amount of the tax required to be shown on the return for the taxable year, over “(ii) the amount of the tax imposed which is shown on the return, reduced by any rebate (within the meaning of section 6211(b)(2)). “(B) Reduction for understatement due to position of taxpayer or disclosed item.— The amount of the understatement under subparagraph (A) shall be reduced by that portion of the understatement which is attributable to— “(i) the tax treatment of any item by the taxpayer if there is or was substantial authority for such treatment, or “(ii) any item with respect to which the relevant facts affecting the item’s tax treatment are adequately disclosed in the return or in a statement attached to the return. “(C) Special rules in cases involving tax shelters.— “(i) In general.— In the case of any item attributable to a tax shelter— “(I) subparagraph (B)(ii) shall not apply, and “(II) subparagraph (B)(i) shall not apply unless (in addition to meeting the requirements of such subparagraph) the taxpayer reasonably believed that the tax treatment of such item by the taxpayer was more likely than not the proper treatment. “(ii) Tax shelter.— For purposes of clause (i), the term ‘tax shelter’ means— “(I) a partnership or other entity, “(II) any investment plan or arrangement, or “(III) any other plan or arrangement, if the principal purpose of such partnership, entity, plan, or arrangement is the avoidance or evasion of Federal income tax. “(D) Secretarial list.— The Secretary shall prescribe (and revise not less frequently than annually) a list of positions— “(i) for which the Secretary believes there is not substantial authority, and “(ii) which affect a significant number of taxpayers. Federal Register, publication. Such list (and any revision thereof) shall be published in the Federal Register. “(e) Substantial Valuation Overstatement Under Chapter 1.— “(1) In general.— For purposes of this section, there is a substantial valuation overstatement under chapter 1 if the value of any property (or the adjusted basis of any property) claimed on any return of tax imposed by chapter 1 is 200 percent or more of the amount determined to be the correct amount of such valuation or adjusted basis (as the case may be). “(2) Limitation.— No penalty shall be imposed by reason of subsection (b)(3) unless the portion of the underpayment for the taxable year attributable to substantial valuation overstatements under chapter 1 exceeds $5,000 ($10,000 in the case of a corporation other than an S corporation or a personal holding company (as defined in section 542)). “(f) Substantial Overstatement of Pension Liabilities.— “(1) In general.— For purposes of this section, there is a substantial overstatement of pension liabilities if the actuarial determination of the liabilities taken into account for purposes of computing the deduction under paragraph (1) or (2) of section 404(a) is 200 percent or more of the amount determined to be the correct amount of such liabilities. “(2) Limitation.— No penalty shall be imposed by reason of subsection (b)(4) unless the portion of the underpayment for the taxable year attributable to substantial overstatements of pension liabilities exceeds $1,000. “(g) Substantial Estate or Gift Tax Valuation Understatement.— “(1) In general.— For purposes of this section, there is a substantial estate or gift tax valuation understatement if the value of any property claimed on any return of tax imposed by subtitle B is 50 percent or less of the amount determined to be the correct amount of such valuation. “(2) Limitation.— No penalty shall be imposed by reason of subsection (b)(5) unless the portion of the underpayment attributable to substantial estate or gift tax valuation understatements for the taxable period (or, in the case of the tax imposed by chapter 11, with respect to the estate of the decedent) exceeds $5,000. “(h) Increase in Penalty in Case of Gross Valuation Misstatements.— “(1) In general.— To the extent that a portion of the underpayment to which this section applies is attributable to one or more gross valuation misstatements, subsection (a) shall be applied with respect to such portion by substituting ‘40 percent’ for ‘20 percent’. “(2) Gross valuation misstatements.— The term ‘gross valuation misstatements’ means— “(A) any substantial valuation overstatement under chapter 1 as determined under subsection (e) by substituting ‘400 percent’ for ‘200 percent’, “(B) any substantial overstatement of pension liabilities as determined under subsection (f) by substituting ‘400 percent’ for ‘200 percent’, and “(C) any substantial estate or gift tax valuation understatement as determined under subsection (g) by substituting ‘25 percent’ for ‘50 percent’. “SEC. 6663. IMPOSITION OF FRAUD PENALTY. “(a) Imposition of Penalty.— If any part of any underpayment of tax required to be shown on a return is due to fraud, there shall be added to the tax an amount equal to 75 percent of the portion of the underpayment which is attributable to fraud. “(b) Determination of Portion Attributable to Fraud.— If the Secretary establishes that any portion of an underpayment is attributable to fraud, the entire underpayment shall be treated as attributable to fraud, except with respect to any portion of the underpayment which the taxpayer establishes (by a preponderance of the evidence) is not attributable to fraud. “(c) Special Rule for Joint Returns.— In the case of a joint return, this section shall not apply with respect to a spouse unless some part of the underpayment is due to the fraud of such spouse. “SEC. 6664. DEFINITIONS AND SPECIAL RULES. “(a) Underpayment.— For purposes of this part, the term ‘underpayment’ means the amount by which any tax imposed by this tide exceeds the excess of— “(1) the sum of— “(A) the amount shown as the tax by the taxpayer on his return, plus “(B) amounts not so shown previously assessed (or collected without assessment), over “(2) the amount of rebates made. For purposes of paragraph (2), the term ‘rebate’ means so much of an abatement, credit, refund, or other repayment, as was made on the ground that the tax imposed was less than the excess of the amount specified in paragraph (1) over the rebates previously made. “(b) Penalties Applicable Only Where Return Filed.— The penalties provided in this part shall apply only in cases where a return of tax is filed (other than a return prepared by the Secretary under the authority of section 6020(b)). “(c) Reasonable Cause Exception.— “(1) In general.— No penalty shall be imposed under this part with respect to any portion of an underpayment if it is shown that there was a reasonable cause for such portion and that the taxpayer acted in good faith with respect to such portion. “(2) Special rule for certain valuation overstatements.— In the case of any underpayment attributable to a substantial or gross valuation overstatement under chapter 1 with respect to charitable deduction property, paragraph (1) shall not apply unless— “(A) the claimed value of the property was based on a qualified appraisal made by a qualified appraiser, and “(B) in addition to obtaining such appraisal, the taxpayer made a good faith investigation of the value of the contributed property. “(3) Definitions.— For purposes of this subsection— “(A) Charitable deduction property.— The term ‘charitable deduction property’ means any property contributed by the taxpayer in a contribution for which a deduction was claimed under section 170. For purposes of paragraph (2), such term shall not include any securities for which (as of the date of the contribution) market quotations are readily available on an established securities market. “(B) Qualified appraiser.— The term ‘qualified appraiser’ means any appraiser meeting the requirements of the regulations prescribed under section 170(a)(1). “(C) Qualified appraisal.— The term ‘qualified appraisal’ means any appraisal meeting the requirements of the regulations prescribed under section 170(a)(1). “PART III— APPLICABLE RULES “Sec. 6665. Applicable rules. “SEC. 6665. APPLICABLE RULES. “(a) Additions Treated as Tax.— Except as otherwise provided in this title— “(1) the additions to the tax, additional amounts, and penalties provided by this chapter shall be paid upon notice and demand and shall be assessed, collected, and paid in the same manner as taxes; and “(2) any reference in this title to ‘tax’ imposed by this title shall be deemed also to refer to the additions to the tax, additional amounts, and penalties provided by this chapter. “(b) Procedure for Assessing Certain Additions to Tax.— For purposes of subchapter B of chapter 63 (relating to deficiency procedures for income, estate, gift, and certain excise taxes), subsection (a) shall not apply to any addition to tax under section 6651, 6654, or 6655; except that it shall apply— “(1) in the case of an addition described in section 6651, to that portion of such addition which is attributable to a deficiency in tax described in section 6211; or “(2) to an addition described in section 6654 or 6655, if no return is filed for the taxable year.”

  2. Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11312(b)(1) · 104 Stat. 1388

    1. Amended · 26 U.S.C. § 6662(b)(3)

      Pub. L. 101–508, § 11312(b)(1), amended par. (3) generally

    2. Substituted · 26 U.S.C. § 6662(b)(3)

      Pub. L. 101–508, § 11312(b)(1), substituting “misstatement” for “overstatement”

    Source evidence

    Code amendment note
    Subsec. (b)(3). Pub. L. 101–508, § 11312(b)(1), amended par. (3) generally, substituting “misstatement” for “overstatement”.

    Enacted provision · exact public law section
    (1) Paragraph (3) of section 6662(b) is amended to read as follows: “(3) Any substantial valuation misstatement under chapter

  3. Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11312(a) · 104 Stat. 1388

    1. Substituted · 26 U.S.C. § 6662(e)

      Pub. L. 101–508, § 11312(a), substituted “misstatement” for “overstatement” in heading

    2. Amended · 26 U.S.C. § 6662(e)

      Pub. L. 101–508, § 11312(a), amended text generally. Prior to amendment, text read as follows:

    Source evidence

    Code amendment note
    Subsec. (e). Pub. L. 101–508, § 11312(a), substituted “misstatement” for “overstatement” in heading and amended text generally. Prior to amendment, text read as follows:

    “(1) In general.—For purposes of this section, there is a substantial valuation overstatement under chapter 1 if the value of any property (or the adjusted basis of any property) claimed on any return of tax imposed by chapter 1 is 200 percent or more of the amount determined to be the correct amount of such valuation or adjusted basis (as the case may be). “(2) Limitation.—No penalty shall be imposed by reason of subsection (b)(3) unless the portion of the underpayment for the taxable year attributable to substantial valuation overstatements under chapter 1 exceeds $5,000 ($10,000 in the case of a corporation other than an S corporation or a personal holding company (as defined in section 542)).”

    Enacted provision · exact public law section
    (a) General Rule.— Subsection (e) of section 6662 (defining substantial valuation overstatement under chapter 1) is amended to read as follows: “(e) Substantial Valuation Misstatement Under Chapter 1.— “(1) In general.— For purposes of this section, there is a substantial valuation misstatement under chapter 1 if— “(A) the value of any property (or the adjusted basis of any property) claimed on any return of tax imposed by chapter 1 is 200 percent or more of the amount determined to be the correct amount of such valuation or adjusted basis (as the case may be), or “(B) (i) the price for any property or services (or for the use of property) claimed on any such return in connection with any transaction between persons described in section 482 is 200 percent or more (or 50 percent or less) of the amount determined under section 482 to be the correct amount of such price, or “(ii) the net section 482 transfer price adjustment for the taxable year exceeds $10,000,000. “(2) Limitation.— No penalty shall be imposed by reason of subsection (b)(3) unless the portion of the underpayment for the taxable year attributable to substantia] valuation misstatements under chapter 1 exceeds $5,000 ($10,000 in the case of a corporation other than an S corporation or a personal holding company (as defined in section 542)). “(3) Net section 482 transfer price adjustment.— For purposes of this subsection— “(A) In general.— The term ‘net section 482 transfer price adjustment’ means, with respect to any taxable year, the net increase in taxable income for the taxable year (determined without regard to any amount carried to such taxable year from another taxable year) resulting from adjustments under section 482 in the price for any property or services (or for the use of property). “(B) Certain adjustments excluded in determining threshold.— For purposes of determining whether the $10,600,000 threshold requirement of paragraph (I)(B)(ii) is met, there shall be excluded— “(i) any portion of the net increase in taxable income referred to in subparagraph (A) which is attributable to any redetermination of a price if it is shown that there was a reasonable cause for the taxpayer’s determination of such price and that the taxpayer acted in good faith with respect to such price, and “(ii) any portion of such net increase which is attributable to any transaction solely between foreign corporations unless, in the case of any of such corporations, the treatment of such transaction affects the determination of income from sources within the United States or taxable income effectively connected with the conduct of a trade or business within the United States. “(C) Special rule.— If the regular tax (as defined in section 55(c)) imposed by chapter 1 on the taxpayer is determined by reference to an amount other than taxable income, such amount shall be treated as the taxable income of such taxpayer for purposes of this paragraph.”

  4. Revenue Reconciliation Act of 1990

    Pub. L. 101–508 § 11312(b)(2) · 104 Stat. 1388

    Substituted · 26 U.S.C. § 6662(h)(2)(A)

    Pub. L. 101–508, § 11312(b)(2), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “any substantial valuation overstatement under chapter 1 as determined under subsection (e) by substituting ‘400 percent’ for ‘200 percent’,”

    Source evidence

    Code amendment note
    Subsec. (h)(2)(A). Pub. L. 101–508, § 11312(b)(2), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “any substantial valuation overstatement under chapter 1 as determined under subsection (e) by substituting ‘400 percent’ for ‘200 percent’,”.

    Enacted provision · exact public law section
    (2) Subparagraph (A) of section 6662(h)(2) is amended to read as follows: “(A) any substantial valuation misstatement under chapter 1 as determined under subsection (e) by substituting— “(i) ‘400 percent’ for ‘200 percent’ each place it appears, “(ii) ‘25 percent’ for ‘50 percent’, and “(iii) ‘$20,000,000’ for ‘$10,000,000’,”.

  5. Revenue Reconciliation Act of 1993

    Pub. L. 103–66 § 13251(a) · 107 Stat. 312

    Amended · 26 U.S.C. § 6662(d)(2)(B)(ii)

    Pub. L. 103–66, § 13251(a), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “any item with respect to which the relevant facts affecting the item’s tax treatment are adequately disclosed in the return or in a statement attached to the return.”

    Source evidence

    Code amendment note
    Subsec. (d)(2)(B)(ii). Pub. L. 103–66, § 13251(a), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “any item with respect to which the relevant facts affecting the item’s tax treatment are adequately disclosed in the return or in a statement attached to the return.”

    Enacted provision · exact public law section
    (a) Reasonable Basis Required.— Clause (ii) of section 6662(d)(2)(B) (relating to reduction for understatement due to position of taxpayer or disclosed item) is amended to read as follows: 26 USC 6662. “(ii) any item if— “(I) the relevant facts affecting the item’s tax treatment are adequately disclosed in the return or in a statement attached to the return, and “(II) there is a reasonable basis for the tax treatment of such item by the taxpayer.”

  6. Revenue Reconciliation Act of 1993

    Pub. L. 103–66 § 13236(a) · 107 Stat. 312

    Amended · 26 U.S.C. § 6662(e)(1)(B)(ii)

    Pub. L. 103–66, § 13236(a), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “the net section 482 transfer price adjustment for the taxable year exceeds $10,000,000.”

    Source evidence

    Code amendment note
    Subsec. (e)(1)(B)(ii). Pub. L. 103–66, § 13236(a), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “the net section 482 transfer price adjustment for the taxable year exceeds $10,000,000.”

    Enacted provision · exact public law section
    (a) Threshold Requirement.— Clause (ii) of section 6662(e)(1)(B) (relating to substantial valuation misstatement under chapter 1) is amended to read as follows: “(ii) the net section 482 transfer price adjustment for the taxable year exceeds the lesser of $5,000,000 or 10 percent of the taxpayer’s gross receipts.”

  7. Revenue Reconciliation Act of 1993

    Pub. L. 103–66 § 13236(b) · 107 Stat. 312

    Amended · 26 U.S.C. § 6662(e)(3)(B)

    Pub. L. 103–66, § 13236(b), amended heading and text of subpar. (B) generally. Prior to amendment, text read as follows: “For purposes of determining whether the $10,000,000 threshold requirement of paragraph (1)(B)(ii) is met, there shall be excluded—

    Source evidence

    Code amendment note
    Subsec. (e)(3)(B). Pub. L. 103–66, § 13236(b), amended heading and text of subpar. (B) generally. Prior to amendment, text read as follows: “For purposes of determining whether the $10,000,000 threshold requirement of paragraph (1)(B)(ii) is met, there shall be excluded—

    “(i) any portion of the net increase in taxable income referred to in subparagraph (A) which is attributable to any redetermination of a price if it is shown that there was a reasonable cause for the taxpayer’s determination of such price and that the taxpayer acted in good faith with respect to such price, and “(ii) any portion of such net increase which is attributable to any transaction solely between foreign corporations unless, in the case of any of such corporations, the treatment of such transaction affects the determination of income from sources within the United States or taxable income effectively connected with the conduct of a trade or business within the United States.”

    Enacted provision · exact public law section
    (b) Certain Adjustments Excluded in Determining Threshold.— Subparagraph (B) of section 6662(e)(3) is amended to read as follows: “(B) Certain adjustments excluded in determining threshold.— For purposes of determining whether the threshold requirements of paragraph (1)(B)(ii) are met, the following shall be excluded: “(i) Any portion of the net increase in taxable income referred to in subparagraph (A) which is attributable to any redetennination of a price if— “(I) it is established that the taxpayer determined such price in accordance with a specific pricing method set forth in the regulations prescribed under section 482 and that the taxpayer’s use of such method was reasonable, “(II) the taxpayer has documentation (which was in existence as of the time of filing the return) which sets forth the determination of such price in accordance with such a method and which establishes that the use of such method was reasonable, and “(III) the taxpayer provides such documentation to the Secretary within 30 days of a request for such documentation. “(ii) Any portion of the net increase in taxable income referred to in subparagraph (A) which is attributable to a redetennination of price where such price was not determined in accordance with such a specific pricing method if— “(I) the taxpayer establishes that none of such pricing methods was likely to result in a price that would clearly reflect income, the taxpayer used another pricing method to determine such price, and such other pricing method was likely to result in a price that would clearly reflect income, “(II) the taxpayer has documentation (which was in existence as of the time of filing the return) which sets forth the determination of such price in accordance with such other method and which establishes that the requirements of subclause (I) were satisfied, and “(III) the taxpayer provides such documentation to the Secretary within 30 days of request for such documentation. “(iii) Any portion of such net increase which is attributable to any transaction solely between foreign corporations unless, in the case of any such corporations, the treatment of such transaction affects the determination of income from sources within the United States or taxable income effectively connected with the conduct of a trade or business within the United States.”

  8. Revenue Reconciliation Act of 1993

    Pub. L. 103–66 § 13236(c) · 107 Stat. 312

    Added · 26 U.S.C. § 6662(e)(3)(D)

    Pub. L. 103–66, § 13236(c), added subpar. (D)

    Source evidence

    Code amendment note
    Subsec. (e)(3)(D). Pub. L. 103–66, § 13236(c), added subpar. (D).

    Enacted provision · exact public law section
    (c) Coordination With Reasonable Cause Exception.— Paragraph 26 USC 6662. (3) of section 6662(e) is amended by adding at the end thereof the following new subparagraph: “(D) Coordination with reasonable cause exception.— For purposes of section 6664(c) the taxpayer shall not be treated as having reasonable cause for any portion of an underpayment attributable to a net section 482 transfer price adjustment unless such taxpayer meets the requirements of clause (i), (ii), or (iii) of subparagraph (B) with respect to such portion.”

  9. Revenue Reconciliation Act of 1993

    Pub. L. 103–66 § 13236(d) · 107 Stat. 312

    Amended · 26 U.S.C. § 6662(h)(2)(A)(iii)

    Pub. L. 103–66, § 13236(d), amended cl. (iii) generally. Prior to amendment, cl. (iii) read as follows: “ ‘$20,000,000’ for ‘$10,000,000’,”

    Source evidence

    Code amendment note
    Subsec. (h)(2)(A)(iii). Pub. L. 103–66, § 13236(d), amended cl. (iii) generally. Prior to amendment, cl. (iii) read as follows: “ ‘$20,000,000’ for ‘$10,000,000’,”.

    Enacted provision · exact public law section
    (d) Conforming Amendment.— Clause (iii) of section 6662(h)(2)(A) is amended to read as follows: “(iii) in paragraph (1)(B)(ii)— “(I) ‘$20,000,000’ for ‘$5,000,000’, and “(II) ‘20 percent’ for ‘10 percent’.”

  10. Pub. L. 103–465 § 744(b)(1) · 108 Stat. 4809

    Substituted · 26 U.S.C. § 6662(d)(2)(C)(i)

    Pub. L. 103–465, § 744(b)(1), substituted “In the case of any item of a taxpayer other than a corporation which is” for “In the case of any item” in introductory provisions

    Source evidence

    Code amendment note
    Subsec. (d)(2)(C)(i). Pub. L. 103–465, § 744(b)(1), substituted “In the case of any item of a taxpayer other than a corporation which is” for “In the case of any item” in introductory provisions.

    Enacted provision · exact public law section
    (1) Clause (i) of section 6662(d)(2)(C) is amended by striking “In the case of any item” and inserting “In the case of any item of a taxpayer other than a corporation which is”.

  11. Pub. L. 103–465 § 744(a) · 108 Stat. 4809

    Redesignated · 26 U.S.C. § 6662(d)(2)(C)(ii)

    Pub. L. 103–465, § 744(a), added cl. (ii). Former cl. (ii) redesignated (iii)

    Source evidence

    Code amendment note
    Subsec. (d)(2)(C)(ii). Pub. L. 103–465, § 744(a), added cl. (ii). Former cl. (ii) redesignated (iii).

    Enacted provision · exact public law section
    (a) In General.— Subparagraph (C) of section 6662(d)(2) (relating to special rules in cases involving tax shelters) is amended by redesignating clause (ii) as clause (iii) and by inserting after clause (i) the following new clause: “(ii) Subparagraph (b) not to apply to corporations.— Subparagraph (B) shall not apply to any item of a corporation which is attributable to a tax shelter.”

  12. Pub. L. 103–465 § 744(a) · 108 Stat. 4809

    1. Redesignated · 26 U.S.C. § 6662(d)(2)(C)(iii)

      Pub. L. 103–465, § 744(a), (b)(2), redesignated cl. (ii) as (iii)

    2. Substituted · 26 U.S.C. § 6662(d)(2)(C)(iii)

      Pub. L. 103–465, § 744(a), (b)(2), substituted “this subparagraph” for “clause (i)” in introductory provisions

    Source evidence

    Code amendment note
    Subsec. (d)(2)(C)(iii). Pub. L. 103–465, § 744(a), (b)(2), redesignated cl. (ii) as (iii) and substituted “this subparagraph” for “clause (i)” in introductory provisions.

    Enacted provision · exact public law section
    (a) In General.— Subparagraph (C) of section 6662(d)(2) (relating to special rules in cases involving tax shelters) is amended by redesignating clause (ii) as clause (iii) and by inserting after clause (i) the following new clause: “(ii) Subparagraph (b) not to apply to corporations.— Subparagraph (B) shall not apply to any item of a corporation which is attributable to a tax shelter.”

  13. Pub. L. 105–34 § 1028(c)(1) · 111 Stat. 788

    Inserted · 26 U.S.C. § 6662(d)(2)(B)

    Pub. L. 105–34, § 1028(c)(1), inserted concluding provisions

    Source evidence

    Code amendment note
    Subsec. (d)(2)(B). Pub. L. 105–34, § 1028(c)(1), inserted concluding provisions.

    Enacted provision · exact public law section
    (1) Restriction on reasonable basis for corporate understatement of income tax.— Subparagraph (B) of section 6662(d)(2) is amended by adding at the end the following new flush sentence: “For purposes of clause (ii)(II), in no event shall a corporation be treated as having a reasonable basis for its tax treatment of an item attributable to a multiple-party financing transaction if such treatment does not clearly reflect the income of the corporation.”.

  14. Pub. L. 105–34 § 1028(c)(2) · 111 Stat. 788

    Substituted · 26 U.S.C. § 6662(d)(2)(C)(iii)

    Pub. L. 105–34, § 1028(c)(2), substituted “a significant purpose” for “the principal purpose” in concluding provisions

    Source evidence

    Code amendment note
    Subsec. (d)(2)(C)(iii). Pub. L. 105–34, § 1028(c)(2), substituted “a significant purpose” for “the principal purpose” in concluding provisions.

    Enacted provision · exact public law section
    (2) Modification to definition of tax shelter.— Clause (iii) of section 6662(d)(2)(C) is amended by striking “the principal purpose” and inserting “a significant purpose”.

  15. Pub. L. 108–357 § 812(e)(1) · 118 Stat. 1418

    Inserted · 26 U.S.C. § 6662

    Pub. L. 108–357, § 812(e)(1), inserted “on underpayments” after “penalty” in section catchline

    Source evidence

    Code amendment note
    Pub. L. 108–357, § 812(e)(1), inserted “on underpayments” after “penalty” in section catchline.

    Enacted provision · exact public law section
    (1) The heading for section 6662 is amended to read as follows: “SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON UNDERPAYMENTS.” .

  16. Pub. L. 108–357 § 819(a) · 118 Stat. 1418

    Substituted · 26 U.S.C. § 6662(d)(1)(B)

    Pub. L. 108–357, § 819(a), reenacted heading without change and amended text of subpar. (B) generally. Prior to amendment, text read as follows: “In the case of a corporation other than an S corporation or a personal holding company (as defined in section 542), paragraph (1) shall be applied by substituting ‘$10,000’ for ‘$5,000’.”

    Source evidence

    Code amendment note
    Subsec. (d)(1)(B). Pub. L. 108–357, § 819(a), reenacted heading without change and amended text of subpar. (B) generally. Prior to amendment, text read as follows: “In the case of a corporation other than an S corporation or a personal holding company (as defined in section 542), paragraph (1) shall be applied by substituting ‘$10,000’ for ‘$5,000’.”

    Enacted provision · exact public law section
    (a) Substantial Understatement of Corporations.— Section 6662(d)(1)(B) (relating to special rule for corporations) is amended to read as follows: “(B) Special rule for corporations.— In the case of a corporation other than an S corporation or a personal holding company (as defined in section 542), there is a substantial understatement of income tax for any taxable year if the amount of the understatement for the taxable year exceeds the lesser of— “(i) 10 percent of the tax required to be shown on the return for the taxable year (or, if greater, $10,000), or “(ii) $10,000,000.” .

  17. Pub. L. 108–357 § 812(b) · 118 Stat. 1418

    Inserted · 26 U.S.C. § 6662(d)(2)(A)

    Pub. L. 108–357, § 812(b), inserted concluding provisions

    Source evidence

    Code amendment note
    Subsec. (d)(2)(A). Pub. L. 108–357, § 812(b), inserted concluding provisions.

    Enacted provision · exact public law section
    (b) Determination of Other Understatements.— Subparagraph (A) of section 6662(d)(2) is amended by adding at the end the following flush sentence: “The excess under the preceding sentence shall be determined without regard to items to which section 6662A applies.” .

  18. Pub. L. 108–357 § 812(d) · 118 Stat. 1418

    1. Amended · 26 U.S.C. § 6662(d)(2)(C)

      Pub. L. 108–357, § 812(d), amended subpar. (C) generally

    2. Substituted · 26 U.S.C. § 6662(d)(2)(C)

      Pub. L. 108–357, § 812(d), substituting provisions relating to inapplicability of subpar. (B) to any item attributable to a tax shelter and defining the term “tax shelter” for provisions relating to, in the case of any item of a taxpayer other than a corporation which is attributable to a tax shelter, inapplicability of subpar. (B)(ii) and inapplicability of subpar. (B)(i), unless the taxpayer reasonably believed that the tax treatment of such item by the taxpayer was more likely than not the proper treatment, inapplicability of subpar. (B) to any item of a corporation which is attributable to a tax shelter, and provisions defining the term “tax shelter”

    Source evidence

    Code amendment note
    Subsec. (d)(2)(C). Pub. L. 108–357, § 812(d), amended subpar. (C) generally, substituting provisions relating to inapplicability of subpar. (B) to any item attributable to a tax shelter and defining the term “tax shelter” for provisions relating to, in the case of any item of a taxpayer other than a corporation which is attributable to a tax shelter, inapplicability of subpar. (B)(ii) and inapplicability of subpar. (B)(i), unless the taxpayer reasonably believed that the tax treatment of such item by the taxpayer was more likely than not the proper treatment, inapplicability of subpar. (B) to any item of a corporation which is attributable to a tax shelter, and provisions defining the term “tax shelter”.

    Enacted provision · exact public law section
    (d) Reduction in Penalty for Substantial Understatement of Income Tax Not To Apply to Tax Shelters.— Subparagraph (C) of section 6662(d)(2) (relating to substantial understatement of income tax) is amended to read as follows: “(C) Reduction not to apply to tax shelters.— “(i) In general.— Subparagraph (B) shall not apply to any item attributable to a tax shelter. “(ii) Tax shelter.— For purposes of clause (i), the term ‘tax shelter’ means— “(I) a partnership or other entity, “(II) any investment plan or arrangement, or “(III) any other plan or arrangement, if a significant purpose of such partnership, entity, plan, or arrangement is the avoidance or evasion of Federal income tax.” .

  19. Pub. L. 108–357 § 819(b)(2) · 118 Stat. 1418

    Struck · 26 U.S.C. § 6662(d)(2)(D)

    Pub. L. 108–357, § 819(b)(2), struck out heading and text of subpar. (D). Text read as follows: “The Secretary shall prescribe (and revise not less frequently than annually) a list of positions—

    Source evidence

    Code amendment note
    Subsec. (d)(2)(D). Pub. L. 108–357, § 819(b)(2), struck out heading and text of subpar. (D). Text read as follows: “The Secretary shall prescribe (and revise not less frequently than annually) a list of positions—

    “(i) for which the Secretary believes there is not substantial authority, and “(ii) which affect a significant number of taxpayers. Such list (and any revision thereof) shall be published in the Federal Register.”

    Enacted provision · exact public law section
    (2) Conforming amendment.— Paragraph (2) of section 6662(d) is amended by striking subparagraph (D).

  20. Pub. L. 108–357 § 819(b)(1) · 118 Stat. 1418

    Added · 26 U.S.C. § 6662(d)(3)

    Pub. L. 108–357, § 819(b)(1), added par. (3)

    Source evidence

    Code amendment note
    Subsec. (d)(3). Pub. L. 108–357, § 819(b)(1), added par. (3).

    Enacted provision · exact public law section
    (1) In general.— Section 6662(d) is amended by adding at the end the following new paragraph: “(3) Secretarial list.— The Secretary may prescribe a list of positions which the Secretary believes do not meet the 1 or more of the standards specified in paragraph (2)(B)(i), section 6664(d)(2), and section 6694(a)(1). Such Federal Register, publication. list (and any revisions thereof) shall be published in the Federal Register or the Internal Revenue Bulletin.” .

  21. Tax Technical Corrections Act of 2005

    Pub. L. 109–135 § 403(x)(1) · 119 Stat. 2577

    Inserted · 26 U.S.C. § 6662(b)

    Pub. L. 109–135, § 403(x)(1), inserted at end “Except as provided in paragraph (1) or (2)(B) of section 6662A(e), this section shall not apply to the portion of any underpayment which is attributable to a reportable transaction understatement on which a penalty is imposed under section 6662A.”

    Source evidence

    Code amendment note
    Subsec. (b). Pub. L. 109–135, § 403(x)(1), inserted at end “Except as provided in paragraph (1) or (2)(B) of section 6662A(e), this section shall not apply to the portion of any underpayment which is attributable to a reportable transaction understatement on which a penalty is imposed under section 6662A.”

    Enacted provision · exact public law section
    (1) Subsection (b) of section 6662 is 26 USC 6662. amended by adding at the end the following new sentence: “Except as provided in paragraph (1) or (2)(B) of section 6662A(e), this section shall not apply to the portion of any underpayment which is attributable to a reportable transaction understatement on which a penalty is imposed under section 6662A.”.

  22. Tax Technical Corrections Act of 2005

    Pub. L. 109–135 § 412(aaa) · 119 Stat. 2577

    Struck · 26 U.S.C. § 6662(d)(3)

    Pub. L. 109–135, § 412(aaa), struck out “the” before “1 or more”

    Source evidence

    Code amendment note
    Subsec. (d)(3). Pub. L. 109–135, § 412(aaa), struck out “the” before “1 or more”.

    Enacted provision · exact public law section
    (aaa) Paragraph (3) of section 6662(d) is amended by striking “the” before “1 or more”.

  23. Pub. L. 109–280 § 1219(a)(1)(A) · 120 Stat. 780

    Substituted · 26 U.S.C. § 6662(e)(1)(A)

    Pub. L. 109–280, § 1219(a)(1)(A), substituted “150 percent” for “200 percent”. See Codification note above

    Source evidence

    Code amendment note
    Subsec. (e)(1)(A). Pub. L. 109–280, § 1219(a)(1)(A), substituted “150 percent” for “200 percent”. See Codification note above.

    Enacted provision · exact public law section
    (A) Income taxes.— Subparagraph (A) of section 6662(e)(1) 26 USC 6662. (relating to substantial valuation misstatement under chapter 1) is amended by striking “200 percent” and inserting “150 percent”.

  24. Pub. L. 109–280 § 1219(a)(1)(B) · 120 Stat. 780

    Substituted · 26 U.S.C. § 6662(g)(1)

    Pub. L. 109–280, § 1219(a)(1)(B), substituted “65 percent” for “50 percent”. See Codification note above

    Source evidence

    Code amendment note
    Subsec. (g)(1). Pub. L. 109–280, § 1219(a)(1)(B), substituted “65 percent” for “50 percent”. See Codification note above.

    Enacted provision · exact public law section
    (B) Estate and gift taxes.— Paragraph (1) of section 6662(g) is amended by striking “50 percent” and inserting “65 percent”.

  25. Pub. L. 109–280 § 1219(a)(2)(A) · 120 Stat. 780

    Amended · 26 U.S.C. § 6662(h)(2)(A)(i); 26 U.S.C. § 6662(h)(2)(A)(ii)

    Pub. L. 109–280, § 1219(a)(2)(A), amended cls. (i) and (ii) generally. Prior to amendment, cls. (i) and (ii) read as follows:

    Source evidence

    Code amendment note
    Subsec. (h)(2)(A)(i), (ii). Pub. L. 109–280, § 1219(a)(2)(A), amended cls. (i) and (ii) generally. Prior to amendment, cls. (i) and (ii) read as follows:

    “(i) ‘400 percent’ for ‘200 percent’ each place it appears, “(ii) ‘25 percent’ for ‘50 percent’, and”. See Codification note above.

    Enacted provision · exact public law section
    (A) Income taxes.— Clauses (i) and (ii) of section 6662(h)(2)(A) (relating to increase in penalty in case of gross valuation misstatements) are amended to read as follows: “(i) in paragraph (1)(A), ‘200 percent’ for ‘150 percent’, “(ii) in paragraph (1)(B)(i)— “(I) ‘400 percent’ for ‘200 percent’, and “(II) ‘25 percent’ for ‘50 percent’, and” .

  26. Pub. L. 109–280 § 1219(a)(2)(B) · 120 Stat. 780

    Substituted · 26 U.S.C. § 6662(h)(2)(C)

    Pub. L. 109–280, § 1219(a)(2)(B), substituted “ ‘40 percent’ for ‘65 percent’ ” for “ ‘25 percent’ for ‘50 percent’ ”. See Codification note above

    Source evidence

    Code amendment note
    Subsec. (h)(2)(C). Pub. L. 109–280, § 1219(a)(2)(B), substituted “ ‘40 percent’ for ‘65 percent’ ” for “ ‘25 percent’ for ‘50 percent’ ”. See Codification note above.

    Enacted provision · exact public law section
    (B) Estate and gift taxes.— Subparagraph (C) of section 6662(h)(2) is amended by striking “ ‘25 percent’ for ‘50 percent’ ” and inserting “ ‘40 percent’ for ‘65 percent’ ”.

  27. Hiring Incentives to Restore Employment Act

    Pub. L. 111–147 § 512(a)(1) · 124 Stat. 71

    1. Amended · 26 U.S.C. § 6662(b)(7)

      Pub. L. 111–147, § 512(a)(1), as amended by Pub. L. 113–295, § 208(a)

    2. Added · 26 U.S.C. § 6662(b)(7)

      Pub. L. 111–147, § 512(a)(1), as added par. (7)

    Source evidence

    Code amendment note
    Subsec. (b)(7). Pub. L. 111–147, § 512(a)(1), as amended by Pub. L. 113–295, § 208(a), added par. (7).

    Enacted provision · exact public law section
    (1) in subsection (b), by inserting after paragraph (6) the following new paragraph: “(7) Any undisclosed foreign financial asset understatement.” , and

  28. Hiring Incentives to Restore Employment Act

    Pub. L. 111–147 § 512(a)(2) · 124 Stat. 71

    Added · 26 U.S.C. § 6662(j)

    Pub. L. 111–147, § 512(a)(2), added subsec. (j)

    Source evidence

    Code amendment note
    Subsec. (j). Pub. L. 111–147, § 512(a)(2), added subsec. (j).

    Enacted provision · exact public law section
    (2) by adding at the end the following new subsection: “(j) Undisclosed Foreign Financial Asset Understatement.— “(1) In general.— For purposes of this section, the term ‘undisclosed foreign financial asset understatement’ means, for any taxable year, the portion of the understatement for such taxable year which is attributable to any transaction involving an undisclosed foreign financial asset. “(2) Undisclosed foreign financial asset.— For purposes of this subsection, the term ‘undisclosed foreign financial asset’ means, with respect to any taxable year, any asset with respect to which information was required to be provided under section 6038, 6038B, 6038D, 6046A, or 6048 for such taxable year but was not provided by the taxpayer as required under the provisions of those sections. “(3) Increase in penalty for undisclosed foreign financial asset understatements.— In the case of any portion of an underpayment which is attributable to any undisclosed foreign financial asset understatement, subsection (a) shall be applied with respect to such portion by substituting ‘40 percent’ for ‘20 percent’.” .

  29. Health Care and Education Reconciliation Act of 2010

    Pub. L. 111–152 § 1409(b)(1) · 124 Stat.1029

    Added · 26 U.S.C. § 6662(b)(6)

    Pub. L. 111–152, § 1409(b)(1), added par. (6). See Codification note above

    Source evidence

    Code amendment note
    Subsec. (b)(6). Pub. L. 111–152, § 1409(b)(1), added par. (6). See Codification note above.

    Enacted provision · exact public law section
    (1) In general.— Subsection (b) of section 6662 26 USC 6662. is amended by inserting after paragraph (5) the following new paragraph: “(6) Any disallowance of claimed tax benefits by reason of a transaction lacking economic substance (within the meaning of section 7701(o)) or failing to meet the requirements of any similar rule of law.” .

  30. Health Care and Education Reconciliation Act of 2010

    Pub. L. 111–152 § 1409(b)(2) · 124 Stat.1029

    Added · 26 U.S.C. § 6662(i)

    Pub. L. 111–152, § 1409(b)(2), added subsec. (i). See Codification note above

    Source evidence

    Code amendment note
    Subsec. (i). Pub. L. 111–152, § 1409(b)(2), added subsec. (i). See Codification note above.

    Enacted provision · exact public law section
    (2) Increased penalty for nondisclosed transactions.— Section 6662 is amended by adding at the end the following new subsection: “(i) Increase in Penalty in Case of Nondisclosed Noneconomic Substance Transactions.— “(1) In general.— Applicability. In the case of any portion of an underpayment which is attributable to one or more nondisclosed noneconomic substance transactions, subsection (a) shall be applied with respect to such portion by substituting ‘40 percent’ for ‘20 percent’. “(2) Nondisclosed noneconomic substance transactions.— Definition. For purposes of this subsection, the term ‘nondisclosed noneconomic substance transaction’ means any portion of a transaction described in subsection (b)(6) with respect to which the relevant facts affecting the tax treatment are not adequately disclosed in the return nor in a statement attached to the return. “(3) Special rule for amended returns.— In no event shall any amendment or supplement to a return of tax be taken into account for purposes of this subsection if the amendment or supplement is filed after the earlier of the date the taxpayer is first contacted by the Secretary regarding the examination of the return or such other date as is specified by the Secretary.” .

  31. Tax Technical Corrections Act of 2014

    Pub. L. 113–295 § 208(a) · 128 Stat. 4010

    Amended · 26 U.S.C. § 6662(b)(7)

    Pub. L. 113–295, § 208(a), amended directory language of Pub. L. 111–147, § 512(a)(1). See 2010 Amendment note below

    Source evidence

    Code amendment note
    Subsec. (b)(7). Pub. L. 113–295, § 208(a), amended directory language of Pub. L. 111–147, § 512(a)(1). See 2010 Amendment note below.

    Enacted provision · exact public law section
    (a) Amendment Relating to Section 512.— Paragraph (1) of section 512(a) of the Hiring Incentives to Restore Employment Act 26 USC 6662. is amended by striking “after paragraph (6)” and inserting “after paragraph (5)”.

  32. Surface Transportation and Veterans Health Care Choice Improvement Act of 2015

    Pub. L. 114–41 § 2004(c)(1) · 129 Stat. 443

    Added · 26 U.S.C. § 6662(b)(8)

    Pub. L. 114–41, § 2004(c)(1), added par. (8)

    Source evidence

    Code amendment note
    Subsec. (b)(8). Pub. L. 114–41, § 2004(c)(1), added par. (8).

    Enacted provision · exact public law section
    (1) In general.— Section 6662(b) of such Code is amended by inserting after paragraph (7) the following new paragraph: “(8) Any inconsistent estate basis.” .

  33. Surface Transportation and Veterans Health Care Choice Improvement Act of 2015

    Pub. L. 114–41 § 2004(c)(2) · 129 Stat. 443

    Added · 26 U.S.C. § 6662(k)

    Pub. L. 114–41, § 2004(c)(2), added subsec. (k)

    Source evidence

    Code amendment note
    Subsec. (k). Pub. L. 114–41, § 2004(c)(2), added subsec. (k).

    Enacted provision · exact public law section
    (2) Inconsistent basis reporting.— Section 6662 of such Code is amended by adding at the end the following new subsection: “(k) Inconsistent Estate Basis Reporting.— For purposes of this section, there is an ‘inconsistent estate basis’ if the basis of property claimed on a return exceeds the basis as determined under section 1014(f).” .

  34. Pub. L. 115–97 title I § 11011(c) · 131 Stat. 2054

    Added · 26 U.S.C. § 6662(d)(1)(C)

    Pub. L. 115–97 added subpar. (C)

    Source evidence

    Code amendment note
    Subsec. (d)(1)(C). Pub. L. 115–97 added subpar. (C).

    Enacted provision · exact public law section
    (c) Accuracy-Related Penalty on Determination of Applicable Percentage.— Section 6662(d)(1) is amended by inserting at the end the following new subparagraph: “(C) Special rule for taxpayers claiming section 199a deduction.— In the case of any taxpayer who claims the deduction allowed under section 199A for the taxable year, subparagraph (A) shall be applied by substituting ‘5 percent’ for ‘10 percent’.” .

  35. Department of Commerce Appropriations Act, 2018

    Pub. L. 115–141 § 101(a)(2)(A) · 132 Stat. 348

    Substituted · 26 U.S.C. § 6662(d)(1)(C)

    Pub. L. 115–141, § 101(a)(2)(A), substituted “any deduction” for “the deduction”

    Source evidence

    Code amendment note
    Subsec. (d)(1)(C). Pub. L. 115–141, § 101(a)(2)(A), substituted “any deduction” for “the deduction”.

    Enacted provision · exact public law section
    Sec. 101. During the current fiscal year, applicable appropriations and funds made available to the Department of Commerce by this Act shall be available for the activities specified in the Act of October 26, 1949 (15 U.S.C. 1514), to the extent and in the manner prescribed by the Act, and, notwithstanding 31 U.S.C. 3324, may be used for advanced payments not otherwise authorized only upon the certification of officials designated by the Secretary of Commerce that such payments are in the public interest.

  36. Energy and Water Development and Related Agencies Appropriations Act, 2018

    Pub. L. 115–141 § 401(a)(303) · 132 Stat. 348

    Substituted · 26 U.S.C. § 6662(d)(3)

    Pub. L. 115–141, § 401(a)(303), substituted “section 6664(d)(3)” for “section 6664(d)(2)”

    Source evidence

    Code amendment note
    Subsec. (d)(3). Pub. L. 115–141, § 401(a)(303), substituted “section 6664(d)(3)” for “section 6664(d)(2)”.

    Enacted provision · exact public law section
    Sec. 401. The Nuclear Regulatory Commission shall comply with the July 5, 2011, version of Chapter VI of its Internal Commission Procedures when responding to Congressional requests for information.

  37. Energy and Water Development and Related Agencies Appropriations Act, 2018

    Pub. L. 115–141 § 401(a)(304) · 132 Stat. 348

    Changed · 26 U.S.C. § 6662(i); 26 U.S.C. § 6662(j)

    Pub. L. 115–141, § 401(a)(304), transferred subsec. (i) to appear before subsec. (j)

    Source evidence

    Code amendment note
    Subsecs. (i), (j). Pub. L. 115–141, § 401(a)(304), transferred subsec. (i) to appear before subsec. (j).

    Enacted provision · exact public law section
    Sec. 401. The Nuclear Regulatory Commission shall comply with the July 5, 2011, version of Chapter VI of its Internal Commission Procedures when responding to Congressional requests for information.

  38. Department of Commerce Appropriations Act, 2018

    Pub. L. 115–141 § 104(a) · 132 Stat. 348

    Amended · 26 U.S.C. § 6662(k)

    Pub. L. 115–141, § 104(a), amended subsec. (k) generally. Prior to amendment, text read as follows: “For purposes of this section, there is an ‘inconsistent estate basis’ if the basis of property claimed on a return exceeds the basis as determined under section 1014(f).”

    Source evidence

    Code amendment note
    Subsec. (k). Pub. L. 115–141, § 104(a), amended subsec. (k) generally. Prior to amendment, text read as follows: “For purposes of this section, there is an ‘inconsistent estate basis’ if the basis of property claimed on a return exceeds the basis as determined under section 1014(f).”

    Enacted provision · exact public law section
    Sec. 104. The 33 USC 878a note. requirements set forth by section 105 of the Commerce, Justice, Science, and Related Agencies Appropriations Act, 2012 (Public Law 112–55), as amended by section 105 of title I of division B of Public Law 113–6, are hereby adopted by reference and made applicable with respect to fiscal year 2018: Provided, That the life cycle cost for the Joint Polar Satellite System is $11,322,125,000 and the life cycle cost for the Geostationary Operational Environmental Satellite R-Series Program is $10,828,059,000.

  39. Department of Justice Appropriations Act, 2021

    Pub. L. 116–260 § 212(b)(1) · 134 Stat. 1182

    Added · 26 U.S.C. § 6662(b)(9)

    Pub. L. 116–260, § 212(b)(1), added par. (9)

    Source evidence

    Code amendment note
    Subsec. (b)(9). Pub. L. 116–260, § 212(b)(1), added par. (9).

    Enacted provision · exact public law section
    Sec. 212. At the discretion of the Attorney General, and in addition to any amounts that otherwise may be available (or authorized to be made available) by law, with respect to funds appropriated by this title under the headings “Research, Evaluation and Statistics”, “State and Local Law Enforcement Assistance”, and “Juvenile Justice Programs”— (1) up to 2 percent of funds made available to the Office of Justice Programs for grant or reimbursement programs may be used by such Office to provide training and technical assistance; and (2) up to 2 percent of funds made available for grant or reimbursement programs under such headings, except for amounts appropriated specifically for research, evaluation, or statistical programs administered by the National Institute of Justice and the Bureau of Justice Statistics, shall be transferred to and merged with funds provided to the National Institute of Justice and the Bureau of Justice Statistics, to be used by them for research, evaluation, or statistical purposes, without regard to the authorizations for such grant or reimbursement programs.

  40. Department of Justice Appropriations Act, 2021

    Pub. L. 116–260 § 212(b)(2) · 134 Stat. 1182

    Added · 26 U.S.C. § 6662(l)

    Pub. L. 116–260, § 212(b)(2), added subsec. (l)

    Source evidence

    Code amendment note
    Subsec. (l). Pub. L. 116–260, § 212(b)(2), added subsec. (l).

    Enacted provision · exact public law section
    Sec. 212. At the discretion of the Attorney General, and in addition to any amounts that otherwise may be available (or authorized to be made available) by law, with respect to funds appropriated by this title under the headings “Research, Evaluation and Statistics”, “State and Local Law Enforcement Assistance”, and “Juvenile Justice Programs”— (1) up to 2 percent of funds made available to the Office of Justice Programs for grant or reimbursement programs may be used by such Office to provide training and technical assistance; and (2) up to 2 percent of funds made available for grant or reimbursement programs under such headings, except for amounts appropriated specifically for research, evaluation, or statistical programs administered by the National Institute of Justice and the Bureau of Justice Statistics, shall be transferred to and merged with funds provided to the National Institute of Justice and the Bureau of Justice Statistics, to be used by them for research, evaluation, or statistical purposes, without regard to the authorizations for such grant or reimbursement programs.

  41. Financial Services and General Government Appropriations Act, 2023

    Pub. L. 117–328 § 605(a)(2)(A) · 136 Stat. 4459

    Added · 26 U.S.C. § 6662(b)(10)

    Pub. L. 117–328, § 605(a)(2)(A), added par. (10)

    Source evidence

    Code amendment note
    Subsec. (b)(10). Pub. L. 117–328, § 605(a)(2)(A), added par. (10).

    Enacted provision · exact public law section
    Sec. 605. None of the funds made available by this Act shall be available for any activity or for paying the salary of any Government employee where funding an activity or paying a salary to a Government employee would result in a decision, determination, rule, regulation, or policy that would prohibit the enforcement of section 307 of the Tariff Act of 1930 (19 U.S.C. 1307).

  42. Financial Services and General Government Appropriations Act, 2023

    Pub. L. 117–328 § 605(a)(2)(B) · 136 Stat. 4459

    Added · 26 U.S.C. § 6662(h)(2)(D)

    Pub. L. 117–328, § 605(a)(2)(B), added subpar. (D)

    Source evidence

    Code amendment note
    Subsec. (h)(2)(D). Pub. L. 117–328, § 605(a)(2)(B), added subpar. (D).

    Enacted provision · exact public law section
    Sec. 605. None of the funds made available by this Act shall be available for any activity or for paying the salary of any Government employee where funding an activity or paying a salary to a Government employee would result in a decision, determination, rule, regulation, or policy that would prohibit the enforcement of section 307 of the Tariff Act of 1930 (19 U.S.C. 1307).

  43. Pub. L. 119–21 title VII § 70512(j)(1) · 139 Stat. 268

    Added · 26 U.S.C. § 6662(m)

    Pub. L. 119–21 added subsec. (m)

    Unresolved: Pub. L. 119–21 was not found in the local Statutes at Large index.

    Source evidence

    Code amendment note
    Subsec. (m). Pub. L. 119–21 added subsec. (m).

    Effective date note
    Amendment by Pub. L. 119–21 applicable to taxable years beginning after July 4, 2025, see section 70512(l)(1) of Pub. L. 119–21, set out in a note under section 45 of this title.

47 of 48 references resolved to an enrolled provision · 1 unresolved

Editorial Notes

Codification

Another section 212(b) of div. EE of Pub. L. 116–260 amended section 63 of this title.

Section 1409(b)(1), (2) of Pub. L. 111–152, which directed the amendment of section 6662 without specifying the act to be amended, was executed to this section, which is section 6662 of the Internal Revenue Code of 1986, to reflect the probable intent of Congress. See 2010 Amendment notes below.

Section 1219(a)(1), (2) of Pub. L. 109–280, which directed the amendment of section 6662 without specifying the act to be amended, was executed to this section, which is section 6662 of the Internal Revenue Code of 1986, to reflect the probable intent of Congress. See 2006 Amendment notes below.

Prior Provisions

A prior section 6662, acts Aug. 16, 1954, ch. 736, 68A Stat. 827, § 6659; , Pub. L. 86–470, § 1, 74 Stat. 132; , Pub. L. 91–172, title I, § 101(j)(51), 83 Stat. 531; , Pub. L. 93–406, title II, § 1016(a)(19), 88 Stat. 931; renumbered § 6660, , Pub. L. 97–34, title VII, § 722(a)(1), 95 Stat. 341; renumbered § 6662, , Pub. L. 97–248, title III, § 323(a), 96 Stat. 613, directed that additions be treated as tax and set procedure for assessing certain additions to tax, prior to repeal by Pub. L. 101–239, title VII, § 7721(a), , 103 Stat. 2395, applicable to returns the due date for which (determined without regard to extensions) is after . See section 6665 of this title.

Amendments1990–2025 · 15 rounds

2025

Subsec. (m). Pub. L. 119–21 added subsec. (m).

2022

Subsec. (b)(10). Pub. L. 117–328, § 605(a)(2)(A), added par. (10).

Subsec. (h)(2)(D). Pub. L. 117–328, § 605(a)(2)(B), added subpar. (D).

2020

Subsec. (b)(9). Pub. L. 116–260, § 212(b)(1), added par. (9).

Subsec. (l). Pub. L. 116–260, § 212(b)(2), added subsec. (l).

2018

Subsec. (d)(1)(C). Pub. L. 115–141, § 101(a)(2)(A), substituted “any deduction” for “the deduction”.

Subsec. (d)(3). Pub. L. 115–141, § 401(a)(303), substituted “section 6664(d)(3)” for “section 6664(d)(2)”.

Subsecs. (i), (j). Pub. L. 115–141, § 401(a)(304), transferred subsec. (i) to appear before subsec. (j).

Subsec. (k). Pub. L. 115–141, § 104(a), amended subsec. (k) generally. Prior to amendment, text read as follows: “For purposes of this section, there is an ‘inconsistent estate basis’ if the basis of property claimed on a return exceeds the basis as determined under section 1014(f).”

2017

Subsec. (d)(1)(C). Pub. L. 115–97 added subpar. (C).

2015

Subsec. (b)(8). Pub. L. 114–41, § 2004(c)(1), added par. (8).

Subsec. (k). Pub. L. 114–41, § 2004(c)(2), added subsec. (k).

2014

Subsec. (b)(7). Pub. L. 113–295, § 208(a), amended directory language of Pub. L. 111–147, § 512(a)(1). See 2010 Amendment note below.

2010

Subsec. (b)(6). Pub. L. 111–152, § 1409(b)(1), added par. (6). See Codification note above.

Subsec. (b)(7). Pub. L. 111–147, § 512(a)(1), as amended by Pub. L. 113–295, § 208(a), added par. (7).

Subsec. (i). Pub. L. 111–152, § 1409(b)(2), added subsec. (i). See Codification note above.

Subsec. (j). Pub. L. 111–147, § 512(a)(2), added subsec. (j).

2006

Subsec. (e)(1)(A). Pub. L. 109–280, § 1219(a)(1)(A), substituted “150 percent” for “200 percent”. See Codification note above.

Subsec. (g)(1). Pub. L. 109–280, § 1219(a)(1)(B), substituted “65 percent” for “50 percent”. See Codification note above.

Subsec. (h)(2)(A)(i), (ii). Pub. L. 109–280, § 1219(a)(2)(A), amended cls. (i) and (ii) generally. Prior to amendment, cls. (i) and (ii) read as follows:

“(i) ‘400 percent’ for ‘200 percent’ each place it appears,

“(ii) ‘25 percent’ for ‘50 percent’, and”.

See Codification note above.

Subsec. (h)(2)(C). Pub. L. 109–280, § 1219(a)(2)(B), substituted “ ‘40 percent’ for ‘65 percent’ ” for “ ‘25 percent’ for ‘50 percent’ ”. See Codification note above.

2005

Subsec. (b). Pub. L. 109–135, § 403(x)(1), inserted at end “Except as provided in paragraph (1) or (2)(B) of section 6662A(e), this section shall not apply to the portion of any underpayment which is attributable to a reportable transaction understatement on which a penalty is imposed under section 6662A.”

Subsec. (d)(3). Pub. L. 109–135, § 412(aaa), struck out “the” before “1 or more”.

2004

Pub. L. 108–357, § 812(e)(1), inserted “on underpayments” after “penalty” in section catchline.

Subsec. (d)(1)(B). Pub. L. 108–357, § 819(a), reenacted heading without change and amended text of subpar. (B) generally. Prior to amendment, text read as follows: “In the case of a corporation other than an S corporation or a personal holding company (as defined in section 542), paragraph (1) shall be applied by substituting ‘$10,000’ for ‘$5,000’.”

Subsec. (d)(2)(A). Pub. L. 108–357, § 812(b), inserted concluding provisions.

Subsec. (d)(2)(C). Pub. L. 108–357, § 812(d), amended subpar. (C) generally, substituting provisions relating to inapplicability of subpar. (B) to any item attributable to a tax shelter and defining the term “tax shelter” for provisions relating to, in the case of any item of a taxpayer other than a corporation which is attributable to a tax shelter, inapplicability of subpar. (B)(ii) and inapplicability of subpar. (B)(i), unless the taxpayer reasonably believed that the tax treatment of such item by the taxpayer was more likely than not the proper treatment, inapplicability of subpar. (B) to any item of a corporation which is attributable to a tax shelter, and provisions defining the term “tax shelter”.

Subsec. (d)(2)(D). Pub. L. 108–357, § 819(b)(2), struck out heading and text of subpar. (D). Text read as follows: “The Secretary shall prescribe (and revise not less frequently than annually) a list of positions—

“(i) for which the Secretary believes there is not substantial authority, and

“(ii) which affect a significant number of taxpayers.

Such list (and any revision thereof) shall be published in the Federal Register.”

Subsec. (d)(3). Pub. L. 108–357, § 819(b)(1), added par. (3).

1997

Subsec. (d)(2)(B). Pub. L. 105–34, § 1028(c)(1), inserted concluding provisions.

Subsec. (d)(2)(C)(iii). Pub. L. 105–34, § 1028(c)(2), substituted “a significant purpose” for “the principal purpose” in concluding provisions.

1994

Subsec. (d)(2)(C)(i). Pub. L. 103–465, § 744(b)(1), substituted “In the case of any item of a taxpayer other than a corporation which is” for “In the case of any item” in introductory provisions.

Subsec. (d)(2)(C)(ii). Pub. L. 103–465, § 744(a), added cl. (ii). Former cl. (ii) redesignated (iii).

Subsec. (d)(2)(C)(iii). Pub. L. 103–465, § 744(a), (b)(2), redesignated cl. (ii) as (iii) and substituted “this subparagraph” for “clause (i)” in introductory provisions.

1993

Subsec. (d)(2)(B)(ii). Pub. L. 103–66, § 13251(a), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “any item with respect to which the relevant facts affecting the item’s tax treatment are adequately disclosed in the return or in a statement attached to the return.”

Subsec. (e)(1)(B)(ii). Pub. L. 103–66, § 13236(a), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “the net section 482 transfer price adjustment for the taxable year exceeds $10,000,000.”

Subsec. (e)(3)(B). Pub. L. 103–66, § 13236(b), amended heading and text of subpar. (B) generally. Prior to amendment, text read as follows: “For purposes of determining whether the $10,000,000 threshold requirement of paragraph (1)(B)(ii) is met, there shall be excluded—

“(i) any portion of the net increase in taxable income referred to in subparagraph (A) which is attributable to any redetermination of a price if it is shown that there was a reasonable cause for the taxpayer’s determination of such price and that the taxpayer acted in good faith with respect to such price, and

“(ii) any portion of such net increase which is attributable to any transaction solely between foreign corporations unless, in the case of any of such corporations, the treatment of such transaction affects the determination of income from sources within the United States or taxable income effectively connected with the conduct of a trade or business within the United States.”

Subsec. (e)(3)(D). Pub. L. 103–66, § 13236(c), added subpar. (D).

Subsec. (h)(2)(A)(iii). Pub. L. 103–66, § 13236(d), amended cl. (iii) generally. Prior to amendment, cl. (iii) read as follows: “ ‘$20,000,000’ for ‘$10,000,000’,”.

1990

Subsec. (b)(3). Pub. L. 101–508, § 11312(b)(1), amended par. (3) generally, substituting “misstatement” for “overstatement”.

Subsec. (e). Pub. L. 101–508, § 11312(a), substituted “misstatement” for “overstatement” in heading and amended text generally. Prior to amendment, text read as follows:

“(1) In general.—For purposes of this section, there is a substantial valuation overstatement under chapter 1 if the value of any property (or the adjusted basis of any property) claimed on any return of tax imposed by chapter 1 is 200 percent or more of the amount determined to be the correct amount of such valuation or adjusted basis (as the case may be).

“(2) Limitation.—No penalty shall be imposed by reason of subsection (b)(3) unless the portion of the underpayment for the taxable year attributable to substantial valuation overstatements under chapter 1 exceeds $5,000 ($10,000 in the case of a corporation other than an S corporation or a personal holding company (as defined in section 542)).”

Subsec. (h)(2)(A). Pub. L. 101–508, § 11312(b)(2), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “any substantial valuation overstatement under chapter 1 as determined under subsection (e) by substituting ‘400 percent’ for ‘200 percent’,”.

Statutory Notes and Related Subsidiaries

Effective Date of 2025 Amendment

Amendment by Pub. L. 119–21 applicable to taxable years beginning after , see section 70512(l)(1) of Pub. L. 119–21, set out in a note under section 45 of this title.

Effective Date of 2022 Amendment

Amendment by Pub. L. 117–328 applicable to contributions made after , see section 605(c)(1) of Pub. L. 117–328, set out as a note under section 170 of this title.

Effective Date of 2020 Amendment

Amendment by Pub. L. 116–260 applicable to taxable years beginning after , see section 212(d) of div. EE of Pub. L. 116–260, set out as a note under section 62 of this title.

Effective Date of 2018 Amendment

Amendment by section 101(a)(2)(A) of Pub. L. 115–141 effective as if included in section 11011 of Pub. L. 115–97, see section 101(d) of Pub. L. 115–141, set out as a note under section 62 of this title.

Pub. L. 115–141, div. U, title I, § 104(c), , 132 Stat. 1170, provided that: “The amendments made by this section [amending this section and section 9503 of this title] shall take effect as if included in the provision of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 [Pub. L. 114–41] to which they relate.”

Effective Date of 2017 Amendment

Amendment by Pub. L. 115–97 applicable to taxable years beginning after , see section 11011(e) of Pub. L. 115–97, set out as a note under section 62 of this title.

Effective Date of 2015 Amendment

Amendment by Pub. L. 114–41 applicable to property with respect to which an estate tax return is filed after , see section 2004(d) of Pub. L. 114–41, set out as a note under section 1014 of this title.

Effective Date of 2014 Amendment

Pub. L. 113–295, div. A, title II, § 208(b), , 128 Stat. 4028, provided that: “The amendment made by this section [amending this section] shall take effect as if included in the provision of the Hiring Incentives to Restore Employment Act [Pub. L. 111–147] to which it relates.”

Effective Date of 2010 Amendment

Pub. L. 111–152, title I, § 1409(e), , 124 Stat. 1070, provided that:

“(1)

In general.—

Except as otherwise provided in this subsection, the amendments made by this section [amending this section and sections 6662A, 6664, 6676, and 7701 of this title] shall apply to transactions entered into after the date of the enactment of this Act [].

“(2)

Underpayments.—

The amendments made by subsections (b) and (c)(1) [amending this section and sections 6662A and 6664 of this title] shall apply to underpayments attributable to transactions entered into after the date of the enactment of this Act.

“(3)

Understatements.—

The amendments made by subsection (c)(2) [amending section 6664 of this title] shall apply to understatements attributable to transactions entered into after the date of the enactment of this Act.

“(4)

Refunds and credits.—

The amendment made by subsection (d) [amending section 6676 of this title] shall apply to refunds and credits attributable to transactions entered into after the date of the enactment of this Act.”

Pub. L. 111–147, title V, § 512(b), , 124 Stat. 111, provided that: “The amendments made by this section [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [].”

Effective Date of 2006 Amendment

Amendment by Pub. L. 109–280 applicable to returns filed after , with special rule for certain easements, see section 1219(e)(1), (3) of Pub. L. 109–280, set out as a note under section 170 of this title.

Effective Date of 2005 Amendment

Amendment by section 403(x)(1) of Pub. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title.

Effective Date of 2004 Amendment

Pub. L. 108–357, title VIII, § 812(f), , 118 Stat. 1580, as amended by Pub. L. 109–135, title IV, § 403(x)(3), , 119 Stat. 2629, provided that:

“(1)

In general.—

Except as provided in paragraph (2), the amendments made by this section [enacting section 6662A of this title and amending this section and section 6664 of this title] shall apply to taxable years ending after the date of the enactment of this Act [].

“(2)

Disqualified opinions.—

Section 6664(d)(3)(B) of the Internal Revenue Code of 1986 [now section 6664(d)(4)(B)] (as added by subsection (c)) shall not apply to the opinion of a tax advisor if—

“(A)

the opinion was provided to the taxpayer before the date of the enactment of this Act,

“(B)

the opinion relates to one or more transactions all of which were entered into before such date, and

“(C)

the tax treatment of items relating to each such transaction was included on a return or statement filed by the taxpayer before such date.”

Pub. L. 108–357, title VIII, § 819(c), , 118 Stat. 1585, provided that: “The amendments made by this section [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [].”

Effective Date of 1997 Amendment

Amendment by Pub. L. 105–34 applicable to items with respect to transactions entered into after , see section 1028(e)(2) of Pub. L. 105–34, set out as a note under section 6111 of this title.

Effective Date of 1994 Amendment

Pub. L. 103–465, title VII, § 744(c), , 108 Stat. 5011, provided that: “The amendments made by this section [amending this section] shall apply to items related to transactions occurring after the date of the enactment of this Act [].”

Effective Date of 1993 Amendment

Pub. L. 103–66, title XIII, § 13236(e), , 107 Stat. 506, provided that: “The amendments made by this section [amending this section] shall apply to taxable years beginning after .”

Pub. L. 103–66, title XIII, § 13251(b), , 107 Stat. 531, provided that: “The amendment made by this section [amending this section] shall apply to returns the due dates for which (determined without regard to extensions) are after .”

Effective Date of 1990 Amendment

Pub. L. 101–508, title XI, § 11312(c), , 104 Stat. 1388–455, provided that: “The amendments made by this section [amending this section] shall apply to taxable years ending after the date of the enactment of this Act [].”

Effective Date

Section applicable to returns the due date for which (determined without regard to extensions) is after , see section 7721(d) of Pub. L. 101–239, set out as an Effective Date of 1989 Amendment note under section 461 of this title.

Credits

1989–2025 · 17 acts
  1. 1989Added Pub. L. 101–239, title VII, § 7721(a), , 103 Stat. 2395
  2. 1990amended Pub. L. 101–508, title XI, § 11312(a), (b), , 104 Stat. 1388–454, 1388–455
  3. 1993Pub. L. 103–66, title XIII, §§ 13236(a)–(d), 13251(a), , 107 Stat. 505, 506, 531
  4. 1994Pub. L. 103–465, title VII, § 744(a), (b), , 108 Stat. 5011
  5. 1997Pub. L. 105–34, title X, § 1028(c), , 111 Stat. 928
  6. 2004Pub. L. 108–357, title VIII, §§ 812(b), (d), (e)(1), 819(a), (b), , 118 Stat. 1578, 1580, 1584
  7. 2005Pub. L. 109–135, title IV, §§ 403(x)(1), 412(aaa), , 119 Stat. 2629, 2641
  8. 2006Pub. L. 109–280, title XII, § 1219(a)(1), (2), , 120 Stat. 1083
  9. 2010Pub. L. 111–147, title V, § 512(a), , 124 Stat. 110
  10. 2010Pub. L. 111–152, title I, § 1409(b)(1), (2), , 124 Stat. 1068, 1069
  11. 2014Pub. L. 113–295, div. A, title II, § 208(a), , 128 Stat. 4028
  12. 2015Pub. L. 114–41, title II, § 2004(c), , 129 Stat. 456
  13. 2017Pub. L. 115–97, title I, § 11011(c), , 131 Stat. 2070
  14. 2018Pub. L. 115–141, div. T, § 101(a)(2)(A), div. U, title I, § 104(a), title IV, § 401(a)(303), (304), , 132 Stat. 1155, 1170, 1199
  15. 2020Pub. L. 116–260, div. EE, title II, § 212(b)(1), (2), , 134 Stat. 3067
  16. 2022Pub. L. 117–328, div. T, title VI, § 605(a)(2)(A), (B), , 136 Stat. 5394
  17. 2025Pub. L. 119–21, title VII, § 70512(j)(1), , 139 Stat. 268.
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(Added Pub. L. 101–239, title VII, § 7721(a), , 103 Stat. 2395; amended Pub. L. 101–508, title XI, § 11312(a), (b), , 104 Stat. 1388–454, 1388–455; Pub. L. 103–66, title XIII, §§ 13236(a)–(d), 13251(a), , 107 Stat. 505, 506, 531; Pub. L. 103–465, title VII, § 744(a), (b), , 108 Stat. 5011; Pub. L. 105–34, title X, § 1028(c), , 111 Stat. 928; Pub. L. 108–357, title VIII, §§ 812(b), (d), (e)(1), 819(a), (b), , 118 Stat. 1578, 1580, 1584; Pub. L. 109–135, title IV, §§ 403(x)(1), 412(aaa), , 119 Stat. 2629, 2641; Pub. L. 109–280, title XII, § 1219(a)(1), (2), , 120 Stat. 1083; Pub. L. 111–147, title V, § 512(a), , 124 Stat. 110; Pub. L. 111–152, title I, § 1409(b)(1), (2), , 124 Stat. 1068, 1069; Pub. L. 113–295, div. A, title II, § 208(a), , 128 Stat. 4028; Pub. L. 114–41, title II, § 2004(c), , 129 Stat. 456; Pub. L. 115–97, title I, § 11011(c), , 131 Stat. 2070; Pub. L. 115–141, div. T, § 101(a)(2)(A), div. U, title I, § 104(a), title IV, § 401(a)(303), (304), , 132 Stat. 1155, 1170, 1199; Pub. L. 116–260, div. EE, title II, § 212(b)(1), (2), , 134 Stat. 3067; Pub. L. 117–328, div. T, title VI, § 605(a)(2)(A), (B), , 136 Stat. 5394; Pub. L. 119–21, title VII, § 70512(j)(1), , 139 Stat. 268.)

Parsed from the official OLRC USLM XML in data/usc_all/usc26.xml · release point 119-108 · OLRC build 2026-09-16

USLM identifier /us/usc/t26/s6662