Bloomberg Bloomberg
Comprehensive Tax Research. Practitioner to Practitioner. ®

Internal Revenue Code, § 6662. Imposition Of Accuracy-Related Penalty On Underpayments

I.R.C. § 6662(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.
I.R.C. § 6662(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:
I.R.C. § 6662(b)(1)
Negligence or disregard of rules or regulations.
I.R.C. § 6662(b)(2)
Any substantial understatement of income tax.
I.R.C. § 6662(b)(3)
Any substantial valuation misstatement under chapter 1.
I.R.C. § 6662(b)(4)
Any substantial overstatement of pension liabilities.
I.R.C. § 6662(b)(5)
Any substantial estate or gift tax valuation understatement.
I.R.C. § 6662(b)(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.
I.R.C. § 6662(b)(7)
Any undisclosed foreign financial asset understatement.
I.R.C. § 6662(b)(8)
Any inconsistent estate basis.
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.
I.R.C. § 6662(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.
I.R.C. § 6662(d) Substantial Understatement Of Income Tax
I.R.C. § 6662(d)(1) Substantial Understatement
I.R.C. § 6662(d)(1)(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.R.C. § 6662(d)(1)(A)(i)
10 percent of the tax required to be shown on the return for the taxable year, or
I.R.C. § 6662(d)(1)(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.R.C. § 6662(d)(1)(B)(i)
10 percent of the tax required to be shown on the return for the taxable year (or, if greater, $10,000), or
I.R.C. § 6662(d)(1)(B)(ii)
$10,000,000.
I.R.C. § 6662(d)(1)(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”.
I.R.C. § 6662(d)(2) Understatement
I.R.C. § 6662(d)(2)(A) In General
For purposes of paragraph (1), the term “understatement” means the excess of—
I.R.C. § 6662(d)(2)(A)(i)
the amount of the tax required to be shown on the return for the taxable year, over
I.R.C. § 6662(d)(2)(A)(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.
I.R.C. § 6662(d)(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.R.C. § 6662(d)(2)(B)(i)
the tax treatment of any item by the taxpayer if there is or was substantial authority for such treatment, or
I.R.C. § 6662(d)(2)(B)(ii)
any item if—
I.R.C. § 6662(d)(2)(B)(ii)(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
I.R.C. § 6662(d)(2)(B)(ii)(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.
I.R.C. § 6662(d)(2)(C) Reduction Not To Apply To Tax Shelters
I.R.C. § 6662(d)(2)(C)(i) In General
Subparagraph (B) shall not apply to any item attributable to a tax shelter.
I.R.C. § 6662(d)(2)(C)(ii) Tax Shelter
For purposes of clause (i), the term “tax shelter” means—
I.R.C. § 6662(d)(2)(C)(ii)(I)
a partnership or other entity,
I.R.C. § 6662(d)(2)(C)(ii)(II)
any investment plan or arrangement, or
I.R.C. § 6662(d)(2)(C)(ii)(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.
I.R.C. § 6662(d)(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.
I.R.C. § 6662(e) Substantial Valuation Misstatement Under Chapter 1
I.R.C. § 6662(e)(1) In General
For purposes of this section, there is a substantial valuation misstatement under chapter 1 if—
I.R.C. § 6662(e)(1)(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
I.R.C. § 6662(e)(1)(B)
I.R.C. § 6662(e)(1)(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
I.R.C. § 6662(e)(1)(B)(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.
I.R.C. § 6662(e)(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)).
I.R.C. § 6662(e)(3) Net Section 482 Transfer Price Adjustment
For purposes of this subsection—
I.R.C. § 6662(e)(3)(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).
I.R.C. § 6662(e)(3)(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.R.C. § 6662(e)(3)(B)(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.R.C. § 6662(e)(3)(B)(i)(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,
I.R.C. § 6662(e)(3)(B)(i)(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
I.R.C. § 6662(e)(3)(B)(i)(III)
the taxpayer provides such documentation to the Secretary within 30 days of a request for such documentation.
I.R.C. § 6662(e)(3)(B)(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.R.C. § 6662(e)(3)(B)(ii)(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,
I.R.C. § 6662(e)(3)(B)(ii)(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
I.R.C. § 6662(e)(3)(B)(ii)(III)
the taxpayer provides such documentation to the Secretary within 30 days of request for such documentation.
I.R.C. § 6662(e)(3)(B)(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.
I.R.C. § 6662(e)(3)(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.
I.R.C. § 6662(e)(3)(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.
I.R.C. § 6662(f) Substantial Overstatement Of Pension Liabilities
I.R.C. § 6662(f)(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.
I.R.C. § 6662(f)(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.
I.R.C. § 6662(g) Substantial Estate Or Gift Tax Valuation Understatement
I.R.C. § 6662(g)(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.
I.R.C. § 6662(g)(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.
I.R.C. § 6662(h) Increase In Penalty In Case Of Gross Valuation Misstatements
I.R.C. § 6662(h)(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”.
I.R.C. § 6662(h)(2) Gross Valuation Misstatements
The term “gross valuation misstatements” means—
I.R.C. § 6662(h)(2)(A)
any substantial valuation misstatement under chapter 1 as determined under subsection (e) by substituting—
I.R.C. § 6662(h)(2)(A)(i)
in paragraph (1)(A), “200 percent” for “150 percent”,
I.R.C. § 6662(h)(2)(A)(ii)
in paragraph (1)(B)(i)—
I.R.C. § 6662(h)(2)(A)(ii)(I)
“400 percent” for “200 percent”, and
I.R.C. § 6662(h)(2)(A)(ii)(II)
“25 percent” for “50 percent”, and
I.R.C. § 6662(h)(2)(A)(iii)
in paragraph (1)(B)(ii)—
I.R.C. § 6662(h)(2)(A)(iii)(I)
“$20,000,000” for “$5,000,000”, and
I.R.C. § 6662(h)(2)(A)(iii)(II)
“20 percent” for “10 percent”.
I.R.C. § 6662(h)(2)(B)
any substantial overstatement of pension liabilities as determined under subsection (f) by substituting “400 percent” for “200 percent”, and
I.R.C. § 6662(h)(2)(C)
any substantial estate or gift tax valuation understatement as determined under subsection (g) by substituting “40 percent” for “65 percent”.
I.R.C. § 6662(i) Increase In Penalty In Case Of Nondisclosed Noneconomic Substance Transactions
I.R.C. § 6662(i)(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”.
I.R.C. § 6662(i)(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.
I.R.C. § 6662(i)(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.
I.R.C. § 6662(j) Undisclosed Foreign Financial Asset Understatement
I.R.C. § 6662(j)(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.
I.R.C. § 6662(j)(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.
I.R.C. § 6662(j)(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”.
I.R.C. § 6662(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).
(Added by Pub. L. 101-239, title VII, Sec. 7721(a), Dec. 19, 1989, 103 Stat. 2395, and amended by Pub. L. 101-508, title XI, Sec. 11312(a), (b), Nov. 5, 1990, 104 Stat. 1388-454, 1388-455; Aug. 10, 1993, Pub. L. 103-66, title XIII, Sec. 13236, 13251(a), 107 Stat. 312; Dec. 8, 1994, Pub. L. 103-465, title VII, Sec. 744(a), (b)(1), (b)(2); Pub. L. 105-34, title X, Sec. 1028(c)(1), (c)(2), Aug. 5, 1997, 111 Stat 788; Pub. L. 108-357, title VIII, Sec. 812(b), (d), (e), 819(a), (b), Oct. 22, 2004, 118 Stat. 1418; Pub. L. 109-135, title IV, Sec. 403(x)(1), 412(aaa), Dec. 21, 2005, 119 Stat. 2577; Pub. L. 109-280, title XII, Sec. 1219(a), Aug. 17, 2006, 120 Stat. 780; Pub. L. 111-147, Sec. 512(a), Mar. 18, 2010, 124 Stat. 71; Pub. L. 111-152, Sec. 1409(b), Mar. 30, 2010, 124 Stat. 1029; Pub. L. 114-41, title II, Sec. 2004(c), July 31, 2015, 129 Stat. 443; Pub. L. 115-97, title I, Sec. 11011(c), Dec. 22, 2017, 131 Stat. 2054; Pub. L. 115-141, Div. T, Sec. 101(a)(2)(A), Div. U, title I, Sec. 104(a), title IV, Sec. 401(a), Mar. 23, 2018, 132 Stat. 348.)
BACKGROUND NOTES
AMENDMENTS
2018 — Subsec. (d)(1)(C). Pub. L. 115-141, Div. T, Sec. 101(a)(2)(A), amended subpar. (C) by substituting “any deduction” for “the deduction”.
Subsec. (d)(3). Pub. L. 115-141, Div. U, Sec. 401(a)(303), amended par. (3) by substituting “section 6664(d)(3)” for “section 6664(d)(2)”.
Subsec. (i)-(j). Pub. L. 115-141, Div. U, Sec. 401(a)(304), moved subsec. (i) before subsec. (j).
Subsec. (k). Pub. L. 115-141, Div. U, Sec. 104(a), amended subsec. (k). Before amendment, it read as follows:
“(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).”
2017 — Subsec. (d)(1)(C). Pub. L. 115-97, Sec. 11011(c), amended subsec. (d)(1) by adding subpar. (C).
2015 - Subsec. (b)(8). Pub. L. 114-41, Sec. 2004(c)(1), amended subsec. (b) by adding par. (8).
Subsec. (k), Pub. L. 114-41, Sec. 2004(c)(2), added subsec. (k).
2010 - Subsec. (b)(6). Pub. L. 111-152, Sec. 1409(b)(1), amended subsec. (b) by adding par. (6).
Subsec. (i). Pub. L. 111-152, Sec. 1409(b)(2), added subsec. (i).
Subsec. (b)(7). Pub. L. 111-147, Sec. 512(a)(1), amended subsec. (b) by adding par. (7).
Sec. (j). Pub. L. 111-147, Sec. 512(a)(2), added subsec. (j).
2006 - Subsec. (e)(1)(A). Pub. L. 109-280, Sec. 1219(a)(1)(A), amended subpar. (A) by substituting “150 percent” for “200 percent”.
Subsec. (g)(1). Pub. L. 109-280, Sec. 1219(a)(1)(B), amended par. (1) by substituting “65 percent” for “50 percent”.
Subsec. (h)(2)(A)(i)-(ii). Pub. L. 109-280, Sec. 1219(a)(2)(A), amended clause (i)-(ii). Before amendment, it read as follows:
“(i) “400 percent” for “200 percent” each place it appears,
“(ii)
“25 percent” for “50 percent”, and
Subsec. (h)(2)(C). Pub. L. 109-280, Sec. 1219(a)(2), amended subpar. (C) by substituting “‘40 percent’ for ‘65 percent'" for “‘25 percent’ for ‘50 percent'".
2005 - Subsec. (b). Pub. L. 109-135, Sec. 403(x)(1), amended subsec. (b) by adding the sentence at the end.
Subsec. (d)(3). Pub. L. 109-135, Sec. 412(aaa), amended par. (3) by striking “the” before “1 or more”.
2004 - Sec. 6662, heading. Pub. L. 108-357, Sec. 812(e), amended heading by inserting, “On Underpayments” after “Penalty”. Prior to amendment, the heading read as follows:
“Imposition of Accuracy-Related Penalty.”.
Subsec. (d)(1)(B). Pub. L. 108-357, Sec. 819(a), amended subpar. (B). Before amendment, it 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), paragraph (1) shall be applied by substituting “$10,000” for “$5,000”.”
Subsec. (d)(2)(A). Pub. L. 108-357, Sec. 812(b), added the flush sentence at the end of subpar. (A).
Subsec. (d)(2)(C). Pub. L. 108-357, Sec. 812(d), amended subpar. (C). Before amendment it read as follows:
“(C) Special rules in cases involving tax shelters. --
(i) In general. --
In the case of any item of a taxpayer other than a corporation which is 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) 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.
“(iii) Tax shelter. --
For purposes of this subparagraph, 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.”
Subsec.(d)(2)(D). Pub. L. 108-357, Sec. 819(b)(2), struck subpar. (D). Before being struck, it read as follows:
“(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.
Such list (and any revision thereof) shall be published in the Federal register.”
Subsec. (d)(3). Pub. L. 108-357, Sec. 819(b)(1), added par. (3).
1997 - Subsec. (d)(2)(B). Pub. L. 105-34, Sec. 1028(c)(1), added a flush sentence at the end of subpar. (B).
Subsec. (d)(2)(C)(iii). Pub. L. 105-34, Sec. 1028(c)(2), substituted “a significant purpose” for “the principal purpose” in clause (iii).
1994 - Subsec. (d)(2)(C)(ii) and (iii). Pub. L. 103-465, Sec. 744(a) amended (d)(2)(C) by redesignating clause (ii) as (iii), and inserting a new clause (ii) to read as above, effective for items related to transactions occurring after the date of enactment of this Act.
Subsec. (d)(2)(C)(i). Pub. L. 103-465, Sec. 744(b)(1), amended (i) 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”, effective for items related to transactions occurring after the date of enactment of this Act.
Subsec. (d)(2)(C)(iii). Pub. L. 103-465, Sec. 744(b)(2), amended (iii) by striking “clause (i)” and inserting “this subparagraph”, effective for items related to transactions occurring after the date of enactment of this Act.
1993 - Subsec. (d)(2)(B)(ii). Pub. L. 103-66, Sec. 13251(a), amended clause (ii). Before amendment, it read as follows:
“(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.”
Subsec. (e)(1)(B)(ii). Pub. L. 103-66, Sec. 13236(a), amended clause (ii). Before amendment, it read as follows:
“(ii) the net section 482 transfer price adjustment for the taxable year exceeds $10,000,000.”
Subsec. (e)(3)(B). Pub. L. 103-66, Sec. 13236(b), amended subpar. (B). Before amendment, it read as follows:
“(B) Certain adjustments excluded in determining threshold.—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, Sec. 13236(c), added subpar. (D).
Subsec. (h)(2)(A)(iii). Pub. L. 103-66, Sec. 13236(d), amended clause (iii). Before amendment, it read as follows:
:(iii) ‘$20,000,000' for ‘$10,000,000'”.
1990 - Subsec. (b)(3). Pub. L. 101-508, Sec. 11312(b)(1), amended par. (3) generally, substituting ‘misstatement’ for ‘overstatement’.
Subsec. (e). Pub. L. 101-508, Sec. 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, Sec. 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’,'.
EFFECTIVE DATE OF 2018 AMENDMENTS
Amendment by Pub. L. 115-141, Div. T, Sec. 101(a)(2)(A), effective as if included in section 11011 of Pub. L. 115-97 [effective for taxable years beginning after December 31, 2017].
Amendment by Pub. L. 115-141, Div. U, Sec. 104(a), effective as if included in the provision of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 [Pub. L. 114-41, Sec. 2004] to which it relates [effective for property with respect to which an estate tax return is filed after July 31, 2015].
Amendments by Pub. L. 115-141, Div. U, Sec. 401(a), effective March 23, 2018.
EFFECTIVE DATE OF 2017 AMENDMENT
Amendment by Pub. L. 115-97, Sec. 11011(c), effective for taxable years beginning after December 31, 2017.
EFFECTIVE DATE OF 2015 AMENDMENTS
Amendments by Sec. 2004(c) of Pub. L. 114-41 effective for property with respect to which an estate tax return is filed after the date of the enactment of this Act [Enacted: July 31, 2015].
EFFECTIVE DATE OF 2010 AMENDMENTS
Amendments by Sec. 1409(b) of Pub. L. 111-152 effective for underpayments attributable to transactions entered into after the date of the enactment of this Act [Enacted: Mar. 30, 2010].
Amendments by Sec. 512(a) of Pub. L. 111-147 effective for taxable years beginning after the date of the enactment of this Act [Enacted: Mar. 18, 2010].
EFFECTIVE DATE OF 2006 AMENDMENTS
Amendments by Sec. 1219(a) of Pub. L. 109-280 applicable to returns filed after the date of the enactment of this Act [Enacted: Aug. 17, 2006]. Sec. 1219(e)(3) provided the following special rule:
“(3) SPECIAL RULE FOR CERTAIN EASEMENTS- In the case of a contribution of a qualified real property interest which is a restriction with respect to the exterior of a building described in section 170(h)(4)(C)(ii) of the Internal Revenue Code of 1986, and an appraisal with respect to the contribution, the amendments made by subsections (a) and (b) shall apply to returns filed after July 25, 2006.”
EFFECTIVE DATE OF 2005 AMENDMENTS
Amendment by Sec. 403(x)(1) of Pub. L. 109-135 applicable as if included in the provisions of the American Jobs Creation Act of 2004 [Pub. L. 108-357, Sec. 812] to which it relates.
Amendment by Sec. 412(aaa) of Pub. L. 109-135 applicable on the date of the enactment of this Act [Enacted: Dec. 21, 2005].
EFFECTIVE DATE OF 2004 AMENDMENTS
Amendments by Sec. 812(b),(d) and (e) of Pub. L. 108-357 applicable to taxable years ending after the date of enactment of this Act [Enacted: Oct. 22, 2004].
EFFECTIVE DATE OF 1997 AMENDMENTS
Amendments by Sec. 1028(c) of Pub. L. 105-34 applicable to items with respect to transactions entered into after the date of the enactment of this Act [Aug. 5, 1997].
EFFECTIVE DATE OF 1993 AMENDMENTS
Amendments by Sec. 13236 of Pub. L. 103-66 applicable to taxable years beginning after December 31, 1993.
Amendment by Sec. 13251(a) of Pub. L. 103-66 applicable to returns the due dates for which (determined without regard to extensions) are after December 31, 1993.
EFFECTIVE DATE OF 1990 AMENDMENT
Section 11312(c) of Pub. L. 101-508 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 (Nov. 5, 1990).’
EFFECTIVE DATE
Part applicable to returns the due date for which (determined without regard to extensions) is after Dec. 31, 1989, 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.
WAIVER OF ADDITION TO TAX FOR AMENDMENT BY SEC. 1604(a) OF PUB. L. 104-188
Sec. 1604(b)(3) of Pub. L. 104-188 provided that: ‘No addition to tax shall be made under section 6662 of such Code as a result of the application of subsection (d) of that section (relating to substantial understatements of income tax) with respect to any underpayment of income tax for any taxable year ending before such date of enactment [Aug. 20, 1996], to the extent such underpayment was created or increased by the amendments made by subsection (a) [which added new 167(g) relating to depreciation under income forecast method].’
PRIOR PROVISIONS
A prior section 6662, acts Aug. 16, 1954, ch. 736, 68A Stat. 827, Sec. 6659; May 14, 1960, Pub. L. 86-470, Sec. 1, 74 Stat. 132; Dec. 30, 1969, Pub. L. 91-172, title I, Sec. 101(j)(51), 83 Stat. 531; Sept. 2, 1974, Pub. L. 93-406, title II, Sec. 1016(a)(19), 88 Stat. 931; renumbered Sec. 6660, Aug. 13, 1981, Pub. L. 97-34, title VII, Sec. 722(a)(1), 95 Stat. 341; renumbered Sec. 6662, Sept. 3, 1982, Pub. L. 97-248, title III, Sec. 323(a), 96 Stat. 613, which directed that additions be treated as tax and set procedure for assessing certain additions to tax, was repealed by Pub. L. 101-239, title VII, Sec. 7721(a), Dec. 19, 1989, 103 Stat. 2395, applicable to returns the due date for which (determined without regard to extensions) is after Dec. 31, 1989. See section 6665 of this title.