§ 6664. Definitions and special rules

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. 1989

   Improved Penalty Administration and Compliance Tax Act

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

   Enacted · 26 U.S.C. § 6664

   Added Pub. L. 101–239, title VII, § 7721(a), Dec. 19, 1989, 103 Stat. 2398

   Source evidence

   Code source credit
   Added Pub. L. 101–239, title VII, § 7721(a), Dec. 19, 1989, 103 Stat. 2398

   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. 2004

   Pub. L. 108–357 § 812(c)(2)(B) · 118 Stat. 1418

   Inserted · 26 U.S.C. § 6664(c)

   Pub. L. 108–357, § 812(c)(2)(B), inserted “for underpayments” after “exception” in heading

   Source evidence

   Code amendment note
   Subsec. (c). Pub. L. 108–357, § 812(c)(2)(B), inserted “for underpayments” after “exception” in heading.

   Enacted provision · exact public law section
   (B) The heading for subsection (c) of section 6664 is amended by inserting “for Underpayments” after “Exception”.

3. 2004

   Pub. L. 108–357 § 812(c)(2)(A) · 118 Stat. 1418

   Substituted · 26 U.S.C. § 6664(c)(1)

   Pub. L. 108–357, § 812(c)(2)(A), substituted “section 6662 or 6663” for “this part”

   Source evidence

   Code amendment note
   Subsec. (c)(1). Pub. L. 108–357, § 812(c)(2)(A), substituted “section 6662 or 6663” for “this part”.

   Enacted provision · exact public law section
   (A) Paragraph (1) of section 6664(c) is amended by striking “this part” and inserting “section 6662 or 6663”.

4. 2004

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

   Added · 26 U.S.C. § 6664(d)

   Pub. L. 108–357, § 812(c)(1), added subsec. (d)

   Source evidence

   Code amendment note
   Subsec. (d). Pub. L. 108–357, § 812(c)(1), added subsec. (d).

   Enacted provision · exact public law section
   (1) In general.— Section 6664 is amended by adding at the end the following new subsection: “(d) Reasonable Cause Exception for Reportable Transaction Understatements.— “(1) In general.— No penalty shall be imposed under section 6662A with respect to any portion of a reportable transaction understatement 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 rules.— Paragraph (1) shall not apply to any reportable transaction understatement unless— “(A) the relevant facts affecting the tax treatment of the item are adequately disclosed in accordance with the regulations prescribed under section 6011, “(B) there is or was substantial authority for such treatment, and “(C) the taxpayer reasonably believed that such treatment was more likely than not the proper treatment. A taxpayer failing to adequately disclose in accordance with section 6011 shall be treated as meeting the requirements of subparagraph (A) if the penalty for such failure was rescinded under section 6707A(d). “(3) Rules relating to reasonable belief.— For purposes of paragraph (2)(C)— “(A) In general.— A taxpayer shall be treated as having a reasonable belief with respect to the tax treatment of an item only if such belief— “(i) is based on the facts and law that exist at the time the return of tax which includes such tax treatment is filed, and “(ii) relates solely to the taxpayer’s chances of success on the merits of such treatment and does not take into account the possibility that a return will not be audited, such treatment will not be raised on audit, or such treatment will be resolved through settlement if it is raised. “(B) Certain opinions may not be relied upon.— “(i) In general.— An opinion of a tax advisor may not be relied upon to establish the reasonable belief of a taxpayer if— “(I) the tax advisor is described in clause (ii), or “(II) the opinion is described in clause (iii). “(ii) Disqualified tax advisors.— A tax advisor is described in this clause if the tax advisor— “(I) is a material advisor (within the meaning of section 6111(b)(1)) and participates in the organization, management, promotion, or sale of the transaction or is related (within the meaning of section 267(b) or 707(b)(1)) to any person who so participates, “(II) is compensated directly or indirectly by a material advisor with respect to the transaction, “(III) has a fee arrangement with respect to the transaction which is contingent on all or part of the intended tax benefits from the transaction being sustained, or “(IV) as determined under regulations prescribed by the Secretary, has a disqualifying financial interest with respect to the transaction. “(iii) Disqualified opinions.— For purposes of clause (i), an opinion is disqualified if the opinion— “(I) is based on unreasonable factual or legal assumptions (including assumptions as to future events), “(II) unreasonably relies on representations, statements, findings, or agreements of the taxpayer or any other person, “(III) does not identify and consider all relevant facts, or “(IV) fails to meet any other requirement as the Secretary may prescribe.” .

5. 2006

   Pub. L. 109–280 § 1219(a)(3) · 120 Stat. 780

   Substituted · 26 U.S.C. § 6664(c)(2)

   Pub. L. 109–280, § 1219(a)(3), substituted “paragraph (1) shall not apply. The preceding sentence shall not apply to a substantial valuation overstatement under chapter 1 if—” for “paragraph (1) shall not apply unless—” in introductory provisions. See Codification note above

   Source evidence

   Code amendment note
   Subsec. (c)(2). Pub. L. 109–280, § 1219(a)(3), substituted “paragraph (1) shall not apply. The preceding sentence shall not apply to a substantial valuation overstatement under chapter 1 if—” for “paragraph (1) shall not apply unless—” in introductory provisions. See Codification note above.

   Enacted provision · exact public law section
   (3) Elimination of reasonable cause exception for gross misstatements.— Section 6664(c)(2) 26 USC 6664. (relating to reasonable cause exception for underpayments) is amended by striking “paragraph (1) shall not apply unless” and inserting “paragraph (1) shall not apply. The preceding sentence shall not apply to a substantial valuation overstatement under chapter 1 if”.

6. 2006

   Pub. L. 109–280 § 1219(c)(2) · 120 Stat. 780

   Amended · 26 U.S.C. § 6664(c)(3)(B); 26 U.S.C. § 6664(c)(3)(C)

   Pub. L. 109–280, § 1219(c)(2), amended subpars. (B) and (C) generally. Prior to amendment, subpars. (B) and (C) read as follows:

   Source evidence

   Code amendment note
   Subsec. (c)(3)(B), (C). Pub. L. 109–280, § 1219(c)(2), amended subpars. (B) and (C) generally. Prior to amendment, subpars. (B) and (C) read as follows:

   “(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).” See Codification note above.

   Enacted provision · exact public law section
   (2) Reasonable cause exception.— Subparagraphs (B) and (C) of section 6664(c)(3) are amended to read as follows: “(B) Qualified appraisal.— The term ‘qualified appraisal’ has the meaning given such term by section 170(f)(11)(E)(i). “(C) Qualified appraiser.— The term ‘qualified appraiser’ has the meaning given such term by section 170(f)(11)(E)(ii).” .

7. 2010

   Health Care and Education Reconciliation Act of 2010

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

   1. Added · 26 U.S.C. § 6664(c)(2)(4)

      Pub. L. 111–152, § 1409(c)(1)(A), (C), added par. (2)

   2. Redesignated · 26 U.S.C. § 6664(c)(2)(4)

      Pub. L. 111–152, § 1409(c)(1)(A), (C), redesignated former pars. (2) and (3) as (3) and (4), respectively. See Codification note above

   Source evidence

   Code amendment note
   Subsec. (c)(2) to (4). Pub. L. 111–152, § 1409(c)(1)(A), (C), added par. (2) and redesignated former pars. (2) and (3) as (3) and (4), respectively. See Codification note above.

   Enacted provision · exact public law section
   (A) by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively;

8. 2010

   Health Care and Education Reconciliation Act of 2010

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

   Substituted · 26 U.S.C. § 6664(c)(4)(A)

   Pub. L. 111–152, § 1409(c)(1)(B), substituted “paragraph (3)” for “paragraph (2)”. See Codification note above

   Source evidence

   Code amendment note
   Subsec. (c)(4)(A). Pub. L. 111–152, § 1409(c)(1)(B), substituted “paragraph (3)” for “paragraph (2)”. See Codification note above.

   Enacted provision · exact public law section
   (B) by striking “paragraph (2)” in paragraph (4)(A), as so redesignated, and inserting “paragraph (3)”; and

9. 2010

   Health Care and Education Reconciliation Act of 2010

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

   1. Added · 26 U.S.C. § 6664(d)(2); 26 U.S.C. § 6664(d)(3)

      Pub. L. 111–152, § 1409(c)(2)(A), (C), added par. (2)

   2. Redesignated · 26 U.S.C. § 6664(d)(2); 26 U.S.C. § 6664(d)(3)

      Pub. L. 111–152, § 1409(c)(2)(A), (C), redesignated former par. (2) as (3). Former par. (3) redesignated (4). See Codification note above

   Source evidence

   Code amendment note
   Subsec. (d)(2), (3). Pub. L. 111–152, § 1409(c)(2)(A), (C), added par. (2) and redesignated former par. (2) as (3). Former par. (3) redesignated (4). See Codification note above.

   Enacted provision · exact public law section
   (A) by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively;

10. 2010

    Health Care and Education Reconciliation Act of 2010

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

    Substituted · 26 U.S.C. § 6664(d)(4)

    Pub. L. 111–152, § 1409(c)(2)(B), substituted “paragraph (3)(C)” for “paragraph (2)(C)” in introductory provisions. See Codification note above

    Source evidence

    Code amendment note
    Subsec. (d)(4). Pub. L. 111–152, § 1409(c)(2)(B), substituted “paragraph (3)(C)” for “paragraph (2)(C)” in introductory provisions. See Codification note above.

    Enacted provision · exact public law section
    (B) by striking “paragraph (2)(C)” in paragraph (4), as so redesignated, and inserting “paragraph (3)(C)”; and

11. 2010

    Health Care and Education Reconciliation Act of 2010

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

    Redesignated · 26 U.S.C. § 6664(d)(4)

    Pub. L. 111–152, § 1409(c)(2)(A), redesignated par. (3) as (4). See Codification note above

    Target inherited from the preceding amendment note.

    Source evidence

    Code amendment note
    Pub. L. 111–152, § 1409(c)(2)(A), redesignated par. (3) as (4). See Codification note above.

    Enacted provision · exact public law section
    (A) by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively;

12. 2015

    Department of Justice Appropriations Act, 2016

    Pub. L. 114–113 div. Q title II § 209(a) · 129 Stat. 2242

    Inserted · 26 U.S.C. § 6664(a)

    Pub. L. 114–113 inserted at end “A rule similar to the rule of section 6211(b)(4) shall apply for purposes of this subsection.”

    Source evidence

    Code amendment note
    Subsec. (a). Pub. L. 114–113 inserted at end “A rule similar to the rule of section 6211(b)(4) shall apply for purposes of this subsection.”

    Enacted provision · exact public law section
    Sec. 209. None of the funds made available under this title shall be obligated or expended for any new or enhanced information technology program having total estimated development costs in excess of $100,000,000, unless the Deputy Attorney General and the investment review board certify to the Committees on Appropriations of the House of Representatives and the Senate that the information technology program has appropriate program management controls and contractor oversight mechanisms in place, and that the program is compatible with the enterprise architecture of the Department of Justice.

13. 2022

    Financial Services and General Government Appropriations Act, 2023

    Pub. L. 117–328 div. T title VI § 605(a)(2)(C) · 136 Stat. 4459

    Inserted · 26 U.S.C. § 6664(c)(2)

    Pub. L. 117–328 inserted “or to any disallowance of a deduction described in section 6662(b)(10)” before period at end

    Source evidence

    Code amendment note
    Subsec. (c)(2). Pub. L. 117–328 inserted “or to any disallowance of a deduction described in section 6662(b)(10)” before period at end.

    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).

    Effective date note
    Amendment by Pub. L. 117–328 applicable to contributions made after Dec. 29, 2022, see section 605(c)(1) of Pub. L. 117–328, set out as a note under section 170 of this title.

15 of 15 references resolved to an enrolled provision