Sec. 6664. Definitions And Special Rules

I.R.C. § 6664(a) Underpayment —

For purposes of this part, the term “underpayment” means the amount by which any tax imposed by this title exceeds the excess of—

I.R.C. § 6664(a)(1) —

the sum of—

I.R.C. § 6664(a)(1)(A) —

the amount shown as the tax by the taxpayer on his return, plus

I.R.C. § 6664(a)(1)(B) —

amounts not so shown previously assessed (or collected without assessment), over

I.R.C. § 6664(a)(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. A rule similar to the rule of section 6211(b)(4) shall apply for purposes of this subsection.

I.R.C. § 6664(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)).

I.R.C. § 6664(c) Reasonable Cause Exception For Underpayments

I.R.C. § 6664(c)(1) In General —

No penalty shall be imposed under section 6662 or 6663 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.

I.R.C. § 6664(c)(2) Exception —

Paragraph (1) shall not apply to any portion of an underpayment which is attributable to one or more transactions described in section 6662(b)(6) or to any disallowance of a deduction described in section 6662(b)(10).

I.R.C. § 6664(c)(3) 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. The preceding sentence shall not apply to a substantial valuation overstatement under chapter 1 if—

I.R.C. § 6664(c)(3)(A) —

the claimed value of the property was based on a qualified appraisal made by a qualified appraiser, and

I.R.C. § 6664(c)(3)(B) —

in addition to obtaining such appraisal, the taxpayer made a good faith investigation of the value of the contributed property.

I.R.C. § 6664(c)(4) Definitions —

For purposes of this subsection—

I.R.C. § 6664(c)(4)(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 (3), 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.

I.R.C. § 6664(c)(4)(B) Qualified Appraisal —

The term “qualified appraisal” has the meaning given such term by section 170(f)(11)(E)(i).

I.R.C. § 6664(c)(4)(C) Qualified Appraiser —

The term “qualified appraiser” has the meaning given such term by section 170(f)(11)(E)(ii).

I.R.C. § 6664(d) Reasonable Cause Exception For Reportable Transaction Understatements

I.R.C. § 6664(d)(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.

I.R.C. § 6664(d)(2) Exception —

Paragraph (1) shall not apply to any portion of a reportable transaction understatement which is attributable to one or more transactions described in section 6662(b)(6).

I.R.C. § 6664(d)(3) Special Rules —

Paragraph (1) shall not apply to any reportable transaction understatement unless—

I.R.C. § 6664(d)(3)(A) —

the relevant facts affecting the tax treatment of the item are adequately disclosed in accordance with the regulations prescribed under section 6011,

I.R.C. § 6664(d)(3)(B) —

there is or was substantial authority for such treatment, and

I.R.C. § 6664(d)(3)(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).

I.R.C. § 6664(d)(4) Rules Relating To Reasonable Belief —

For purposes of paragraph (3)(C)—

I.R.C. § 6664(d)(4)(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.R.C. § 6664(d)(4)(A)(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

I.R.C. § 6664(d)(4)(A)(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.

I.R.C. § 6664(d)(4)(B) Certain Opinions May Not Be Relied Upon

I.R.C. § 6664(d)(4)(B)(i) In General —

An opinion of a tax advisor may not be relied upon to establish the reasonable belief of a taxpayer if—

I.R.C. § 6664(d)(4)(B)(i)(I) —

the tax advisor is described in clause (ii), or

I.R.C. § 6664(d)(4)(B)(i)(II) —

the opinion is described in clause (iii).

I.R.C. § 6664(d)(4)(B)(ii) Disqualified Tax Advisors —

A tax advisor is described in this clause if the tax advisor—

I.R.C. § 6664(d)(4)(B)(ii)(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,

I.R.C. § 6664(d)(4)(B)(ii)(II) —

is compensated directly or indirectly by a material advisor with respect to the transaction,

I.R.C. § 6664(d)(4)(B)(ii)(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

I.R.C. § 6664(d)(4)(B)(ii)(IV) —

as determined under regulations prescribed by the Secretary, has a disqualifying financial interest with respect to the transaction.

I.R.C. § 6664(d)(4)(B)(iii) Disqualified Opinions —

For purposes of clause (i), an opinion is disqualified if the opinion—

I.R.C. § 6664(d)(4)(B)(iii)(I) —

is based on unreasonable factual or legal assumptions (including assumptions as to future events),

I.R.C. § 6664(d)(4)(B)(iii)(II) —

unreasonably relies on representations, statements, findings, or agreements of the taxpayer or any other person,

I.R.C. § 6664(d)(4)(B)(iii)(III) —

does not identify and consider all relevant facts, or

I.R.C. § 6664(d)(4)(B)(iii)(IV) —

fails to meet any other requirement as the Secretary may prescribe.

(Added by Pub. L. 101-239, title VII, Sec. 7721(a), Dec. 19, 1989, 103 Stat. 2398; Pub. L. 108-357, title VIII, Sec. 812(c), Oct. 22, 2004, 118 Stat. 1418; Pub. L. 109-280, title XII, Sec. 1219, Aug. 17, 2006, 120 Stat. 780; Pub. L. 111-152, Sec. 1409(c), Mar. 30, 2010, 124 Stat. 1029; Pub. L. 114-113, Div. Q, title II, Sec. 209(a), Dec. 18, 2015; Pub. L. 117-328, Div. T, title VI, Sec. 605(a)(2)(C), Dec. 29, 2022.)

BACKGROUND NOTES

AMENDMENTS

2022 - Subsec. (c)(2). Pub. L. 117-328, Div. T, Sec. 605(a)(2)(C), amended par. (2) by adding “or to any disallowance of a deduction described in section 6662(b)(10)” before the period at the end.

2015 - Subsec. (a). Pub. L. 114-113, Div. Q, Sec. 209(a), amended subsec. (a) by adding “A rule similar to the rule of section 6211(b)(4) shall apply for purposes of this subsection.”

2010 - Subsec. (c)(2)-(4). Pub. L. 111-152, Sec. 1409(c)(1), amended subsec. (c) by redesignating par. (2) and (3) as par. (3) and (4), respectively, and by adding par. (2).

Subsec. (c)(4) (as redesignated). Pub. L. 111-152, Sec. 1409(c)(1)(B), amended par. (4) by substituting “paragraph (3)” for “paragraph (2)”.

Subsec. (d)(2)-(4). Pub. L. 111-152, Sec. 1409(c)(2), amended subsec. (d) by redesignating par. (2) and (3) as par. (3) and (4), respectively, and by adding par. (2).

Subsec. (d)(4) (as redesignated). Pub. L. 111-152, Sec. 1409(c)(2)(B), amended par. (4) by substituting “paragraph (3)(C)” for “paragraph (2)(C)”.

2006 - Subsec. (c)(2). Pub. L. 109-280, Sec. 1219(a)(3), amended par. (2) by substituting “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”.

Subsec. (c)(3)(B), (C). Pub. L. 109-280, Sec. 1219(c)(2), amended subpar. (B) and (C). Before amendment, they 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).”

2004 - Subsec. (c). Pub. L. 108-357, Sec. 812(c)(2)(B), amended subsec. (c) by adding “FOR UNDERPAYNMENTS” after “EXCEPTION" in the heading.

Subsec. (c)(1). Pub. L. 108-357, Sec. 812(c)(2)(A), amended par. (1) by substituting “section 6662 or 6663” for “this part”.

Subsec. (d). Pub. L. 108-357, Sec. 812(c)(1), added subsec. (d).

EFFECTIVE DATE OF 2022 AMENDMENT

Amendments by Sec. 605 of Pub. L. 117-328, Div. T, are applicable to contributions made after the date of the enactment of this Act [Enacted: Dec. 29, 2022].

Sec. 605(c)(2) of Pub. L. 117-328, Div. T, provided the following rule:

“(2) NO INFERENCE.—No inference is intended as to the appropriate treatment of contributions made in taxable years ending on or before the date specified in paragraph (1), or as to any contribution for which a deduction is not disallowed by reason of section 170(h)(7) of the Internal Revenue Code of 1986, as added by this section.”

Sec. 605(d) of Pub. L. 117-328, Div. T, further added:

“(d) SAFE HARBORS AND OPPORTUNITY FOR DONOR TO CORRECT CERTAIN DEED ERRORS.—

“(1) IN GENERAL.—The Secretary of the Treasury (or such Secretary's delegate) shall, within 120 days after the date of the enactment of this Act, publish safe harbor deed language for extinguishment clauses and boundary line adjustments.

“(2) OPPORTUNITY TO CORRECT.—

“(A) IN GENERAL.—During the 90-day period beginning on the date of publication of the safe harbor deed language under paragraph (1), a donor may amend an easement deed to substitute the safe harbor language for the corresponding language in the original deed if—

“(i) the amended deed is signed by the donor and donee and recorded within such 90-day period, and

“(ii) such amendment is treated as effective as of the date of the recording of the original easement deed.

“(B) EXCEPTIONS.—Subparagraph (A) shall not apply to an easement deed relating to any contribution—

“(i) which—

“(I) is part of a reportable transaction (as defined in section 6707A(c)(1) of the Internal Revenue Code of 1986), or

“(II) is described in Internal Revenue Service Notice 2017–10,

“(ii) which by reason of section 170(h)(7) of such Code, as added by this section, is not treated as a qualified conservation contribution,

“(iii) if a deduction for such contribution under section 170 of such Code has been disallowed by the Secretary of the Treasury (or such Secretary's delegate), and the donor is contesting such disallowance in a case which is docketed in a Federal court on a date before the date the amended deed is recorded by the donor, or

“(iv) if a claimed deduction for such contribution under section 170 of such Code resulted in an underpayment to which a penalty under section 6662 or 6663 of such Code applies and—

“(I) such penalty has been finally determined administratively, or

“(II) if such penalty is challenged in court, the judicial proceeding with respect to such penalty has been concluded by a decision or judgment which has become final.”

EFFECTIVE DATE OF 2015 AMENDMENT

Amendment by Pub. L. 114-113, Div. Q, Sec. 209(a), effective for returns filed after the date of the enactment of this Act [Enacted: Dec. 18, 2015] and returns filed on or before such date if the period specified in section 6501 for assessment of the taxes with respect to which such return relates has not expired as of such date.

EFFECTIVE DATE OF 2010 AMENDMENTS

Amendments by Sec. 1409(c)(1) 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. 1409(c)(2) of Pub. L. 111-152 effective for understatements attributable to transactions entered into after the date of the enactment of this Act [Enacted: Mar. 30, 2010].

EFFECTIVE DATE OF 2006 AMENDMENTS

Amendment by Sec. 1219(a) of Pub. L. 109-280 effective for returns filed after the date of the enactment of this Act [Enacted: Aug. 17, 2006].

Amendments by Sec. 1219(c) of Pub. L. 109-280 effective for appraisals prepared with respect to returns or submissions filed after the date of the enactment of this Act [Enacted: Aug. 17, 2006].

Section 1219(e)(3) of Pub. L. 109-280 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 2004 AMENDMENTS

Pub. L. 108-357, Sec. 812(f), as amended by Pub. L. 109-135, Sec. 403(x)(3), provided the following effective date:

“(f) Effective Dates-

“(1) IN GENERAL- Except as provided in paragraph (2), the amendments made by this section 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 (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.”

SAFE HARBORS AND OPPORTUNITY FOR DONOR TO CORRECT CERTAIN DEED ERRORS

Pub. L. 117-328, Div. T, Sec. 605(d) provided that: