Title 26 — Internal Revenue Code
Part I · Chapter 68 — Additions to the Tax, Additional Amounts, and Assessable Penalties
§ 6700. Promoting abusive tax shelters, etc.
Statutory text
Imposition of penalty
Any person who—
organizes (or assists in the organization of)—
a partnership or other entity,
any investment plan or arrangement, or
any other plan or arrangement, or
participates (directly or indirectly) in the sale of any interest in an entity or plan or arrangement referred to in subparagraph (A), and
makes or furnishes or causes another person to make or furnish (in connection with such organization or sale)—
a statement with respect to the allowability of any deduction or credit, the excludability of any income, or the securing of any other tax benefit by reason of holding an interest in the entity or participating in the plan or arrangement which the person knows or has reason to know is false or fraudulent as to any material matter, or
a gross valuation overstatement as to any material matter,
shall pay, with respect to each activity described in paragraph (1), a penalty equal to $1,000 or, if the person establishes that it is lesser, 100 percent of the gross income derived (or to be derived) by such person from such activity. For purposes of the preceding sentence, activities described in paragraph (1)(A) with respect to each entity or arrangement shall be treated as a separate activity and participation in each sale described in paragraph (1)(B) shall be so treated. Notwithstanding the first sentence, if an activity with respect to which a penalty imposed under this subsection involves a statement described in paragraph (2)(A), the amount of the penalty shall be equal to 50 percent of the gross income derived (or to be derived) from such activity by the person on which the penalty is imposed.
Rules relating to penalty for gross valuation overstatements
Gross valuation overstatement defined
For purposes of this section, the term “gross valuation overstatement” means any statement as to the value of any property or services if—
the value so stated exceeds 200 percent of the amount determined to be the correct valuation, and
the value of such property or services is directly related to the amount of any deduction or credit allowable under chapter 1 to any participant.
Authority to waive
The Secretary may waive all or any part of the penalty provided by subsection (a) with respect to any gross valuation overstatement on a showing that there was a reasonable basis for the valuation and that such valuation was made in good faith.
Penalty in addition to other penalties
The penalty imposed by this section shall be in addition to any other penalty provided by law.
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.
Pub. L. 97–248 title III § 320(a) · 96 Stat. 324
Enacted · 26 U.S.C. § 6700
Added Pub. L. 97–248, title III, § 320(a), Sept. 3, 1982, 96 Stat. 611
Source evidence
Code source credit
Added Pub. L. 97–248, title III, § 320(a), Sept. 3, 1982, 96 Stat. 611Enacted provision · exact public law section
(a) General Rule.— Subchapter B of chapter 68 (relating to assessable penalties) is amended by adding at the end thereof the following new section: “SEC. 6700. PROMOTING ABUSIVE TAX SHELTERS, ETC. “(a) Imposition of Penalty.— Any person who— “(1) (A) organizes (or assists in the organization of)— “(i) a partnership or other entity, “(ii) any investment plan or arrangement, or “(iii) any other plan or arrangement, or “(B) participates in the sale of any interest in an entity or plan or arrangement referred to in subparagraph (A), and “(2) makes or furnishes (in connection with such organization or sale)— “(A) a statement with respect to the allowability of any deduction or credit, the excludability of any income, or the securing of any other tax benefit by reason of holding an interest in the entity or participating in the plan or arrangement which the person knows or has reason to know is false or fraudulent as to any material matter, or “(B) a gross valuation overstatement as to any material matter, shall pay a penalty equal to the greater of $1,000 or 10 percent of the gross income derived or to be derived by such person from such activity. “(b) Rules Relating to Penalty for Gross Valuation Over-Statements.— “(1) Gross valuation overstatement defined.— For purposes of this section, the term ‘gross valuation overstatement’ means any statement as to the value of any property or services if— “(A) the value so stated exceeds 200 percent of the amount determined to be the correct valuation, and “(B) the value of such property or services is directly related to the amount of any deduction or credit allowable under chapter 1 to any participant. “(2) Authority to waive.— The Secretary may waive all or any part of the penalty provided by subsection (a) with respect to any gross valuation overstatement on a showing that there was a reasonable basis for the valuation and that such valuation was made in good faith. “(c) Penalty in addition to other penalties.— The penalty imposed by this section shall be in addition to any other penalty provided by law.”Tax Reform Act of 1984
Pub. L. 98–369 div. A title I § 143(a) · 98 Stat. 494
Substituted · 26 U.S.C. § 6700(a)
Pub. L. 98–369 substituted “20 percent” for “10 percent”
Source evidence
Code amendment note
Subsec. (a). Pub. L. 98–369 substituted “20 percent” for “10 percent”.Enacted provision · exact public law section
(a) Increase in Promoter Penalty.— Subsection (a) of section 26 USC 6700. 6700 (relating to promotion of abusive tax shelters) is amended by striking out ”10 percent” and inserting in lieu thereof “20 percent”.Improved Penalty Administration and Compliance Tax Act
Pub. L. 101–239 § 7734(a)(3) · 103 Stat. 2106
Added · 26 U.S.C. § 6700(a)
Pub. L. 101–239, § 7734(a)(3), added concluding provision
Struck · 26 U.S.C. § 6700(a)
Pub. L. 101–239, § 7734(a)(3), struck out former concluding provision which read as follows: “shall pay a penalty equal to the greater of $1,000 or 20 percent of the gross income derived or to be derived by such person from such activity.”
Source evidence
Code amendment note
Subsec. (a). Pub. L. 101–239, § 7734(a)(3), added concluding provision and struck out former concluding provision which read as follows: “shall pay a penalty equal to the greater of $1,000 or 20 percent of the gross income derived or to be derived by such person from such activity.”Enacted provision · exact public law section
(3) by striking the material following paragraph (2) and inserting the following: “shall pay, with respect to each activity described in paragraph (1), a penalty equal to the $1,000 or, if the person establishes that it is lesser, 100 percent of the gross income derived (or to be derived) by such person from such activity. For purposes of the preceding sentence, activities described in paragraph (1)(A) with respect to each entity or arrangement shall be treated as a separate activity and participation in each sale described in paragraph (1)(B) shall be so treated.”Improved Penalty Administration and Compliance Tax Act
Pub. L. 101–239 § 7734(a)(1) · 103 Stat. 2106
Inserted · 26 U.S.C. § 6700(a)(1)(B)
Pub. L. 101–239, § 7734(a)(1), inserted “(directly or indirectly)” after “participates”
Source evidence
Code amendment note
Subsec. (a)(1)(B). Pub. L. 101–239, § 7734(a)(1), inserted “(directly or indirectly)” after “participates”.Enacted provision · exact public law section
(1) by inserting “(directly or indirectly)” after “participates” in paragraph (1)(B),Improved Penalty Administration and Compliance Tax Act
Pub. L. 101–239 § 7734(a)(2) · 103 Stat. 2106
Inserted · 26 U.S.C. § 6700(a)(2)
Pub. L. 101–239, § 7734(a)(2), inserted “or causes another person to make or furnish” after “makes or furnishes” in introductory provisions
Source evidence
Code amendment note
Subsec. (a)(2). Pub. L. 101–239, § 7734(a)(2), inserted “or causes another person to make or furnish” after “makes or furnishes” in introductory provisions.Enacted provision · exact public law section
(2) by inserting “or causes another person to make or furnish” after “makes or furnishes” in paragraph (2), andPub. L. 108–357 title VIII § 818(a) · 118 Stat. 1418
Inserted · 26 U.S.C. § 6700(a)
Pub. L. 108–357 inserted at end of concluding provisions “Notwithstanding the first sentence, if an activity with respect to which a penalty imposed under this subsection involves a statement described in paragraph (2)(A), the amount of the penalty shall be equal to 50 percent of the gross income derived (or to be derived) from such activity by the person on which the penalty is imposed.”
Source evidence
Code amendment note
Subsec. (a). Pub. L. 108–357 inserted at end of concluding provisions “Notwithstanding the first sentence, if an activity with respect to which a penalty imposed under this subsection involves a statement described in paragraph (2)(A), the amount of the penalty shall be equal to 50 percent of the gross income derived (or to be derived) from such activity by the person on which the penalty is imposed.”Enacted provision · exact public law section
(a) Penalty on Promoting Abusive Tax Shelters.— Section 6700(a) is amended by adding at the end the following new sentence: “Notwithstanding the first sentence, if an activity with respect to which a penalty imposed under this subsection involves a statement described in paragraph (2)(A), the amount of the penalty shall be equal to 50 percent of the gross income derived (or to be derived) from such activity by the person on which the penalty is imposed.”.Effective date note
Pub. L. 108–357, title VIII, § 818(b), Oct. 22, 2004, 118 Stat. 1584, provided that: “The amendment made by this section [amending this section] shall apply to activities after the date of the enactment of this Act [Oct. 22, 2004].”Energy and Water Development and Related Agencies Appropriations Act, 2018
Pub. L. 115–141 div. U title IV § 401(a)(314) · 132 Stat. 348
Substituted · 26 U.S.C. § 6700(a)
Pub. L. 115–141 substituted “$1,000” for “the $1,000” in concluding provisions
Source evidence
Code amendment note
Subsec. (a). Pub. L. 115–141 substituted “$1,000” for “the $1,000” in concluding provisions.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.
8 of 8 references resolved to an enrolled provision
Editorial Notes
Amendments1984–2018 · 4 rounds
2018
Subsec. (a). Pub. L. 115–141 substituted “$1,000” for “the $1,000” in concluding provisions.
2004
Subsec. (a). Pub. L. 108–357 inserted at end of concluding provisions “Notwithstanding the first sentence, if an activity with respect to which a penalty imposed under this subsection involves a statement described in paragraph (2)(A), the amount of the penalty shall be equal to 50 percent of the gross income derived (or to be derived) from such activity by the person on which the penalty is imposed.”
1989
Subsec. (a). Pub. L. 101–239, § 7734(a)(3), added concluding provision and struck out former concluding provision which read as follows: “shall pay a penalty equal to the greater of $1,000 or 20 percent of the gross income derived or to be derived by such person from such activity.”
Subsec. (a)(1)(B). Pub. L. 101–239, § 7734(a)(1), inserted “(directly or indirectly)” after “participates”.
Subsec. (a)(2). Pub. L. 101–239, § 7734(a)(2), inserted “or causes another person to make or furnish” after “makes or furnishes” in introductory provisions.
1984
Subsec. (a). Pub. L. 98–369 substituted “20 percent” for “10 percent”.
Statutory Notes and Related Subsidiaries
Effective Date of 2004 Amendment
Pub. L. 108–357, title VIII, § 818(b), , 118 Stat. 1584, provided that: “The amendment made by this section [amending this section] shall apply to activities after the date of the enactment of this Act [].”
Effective Date of 1989 Amendment
Pub. L. 101–239, title VII, § 7734(b), , 103 Stat. 2403, provided that: “The amendment made by subsection (a) [amending this section] shall apply to activities after .”
Effective Date of 1984 Amendment
Pub. L. 98–369, div. A, title I, § 143(c), , 98 Stat. 682, provided that: “The amendments made by this section [amending this section and section 7408 of this title] shall take effect on the day after the date of the enactment of this Act [].”
Effective Date
Pub. L. 97–248, title III, § 320(c), , 96 Stat. 612, provided that: “The amendments made by this section [enacting this section] shall take effect on the day after the date of the enactment of this Act [].”
Credits
1982–2018 · 5 acts
- 1982Added Pub. L. 97–248, title III, § 320(a), , 96 Stat. 611
- 1984amended Pub. L. 98–369, div. A, title I, § 143(a), , 98 Stat. 682
- 1989Pub. L. 101–239, title VII, § 7734(a), , 103 Stat. 2403
- 2004Pub. L. 108–357, title VIII, § 818(a), , 118 Stat. 1584
- 2018Pub. L. 115–141, div. U, title IV, § 401(a)(314), , 132 Stat. 1199.
Show as published
(Added Pub. L. 97–248, title III, § 320(a), , 96 Stat. 611; amended Pub. L. 98–369, div. A, title I, § 143(a), , 98 Stat. 682; Pub. L. 101–239, title VII, § 7734(a), , 103 Stat. 2403; Pub. L. 108–357, title VIII, § 818(a), , 118 Stat. 1584; Pub. L. 115–141, div. U, title IV, § 401(a)(314), , 132 Stat. 1199.)