I.R.C. § 6700(a) Imposition Of Penalty —
Any person who--
I.R.C. § 6700(a)(1)
I.R.C. § 6700(a)(1)(A) —
organizes (or assists in the organization of)--
I.R.C. § 6700(a)(1)(A)(i) —
a partnership or other entity,
I.R.C. § 6700(a)(1)(A)(ii) —
any investment plan or arrangement, or
I.R.C. § 6700(a)(1)(A)(iii) —
any other plan or arrangement, or
I.R.C. § 6700(a)(1)(B) —
participates (directly or indirectly)
in the sale of any interest in an entity or plan or arrangement referred to in subparagraph
(A), and
I.R.C. § 6700(a)(2) —
makes or furnishes or causes another person to make or furnish (in connection with
such organization or sale)--
I.R.C. § 6700(a)(2)(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
I.R.C. § 6700(a)(2)(B) —
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.
I.R.C. § 6700(b) Rules Relating To Penalty For Gross Valuation Overstatements
I.R.C. § 6700(b)(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--
I.R.C. § 6700(b)(1)(A) —
the value so stated exceeds 200 percent of the amount determined to be the correct
valuation, and
I.R.C. § 6700(b)(1)(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.
I.R.C. § 6700(b)(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.
I.R.C. § 6700(c) Penalty In Addition To Other Penalties —
The penalty imposed by this section shall be in addition to any other penalty provided
by law.
(Added Pub. L. 97-248, title III, Sec. 320(a), Sept. 3, 1982, 96 Stat. 611, and amended Pub. L. 98-369, div. A, title I, Sec. 143(a), July 18, 1984, 98 Stat. 682; Pub. L. 101-239, title VII, Sec. 7734(a), Dec. 19, 1989, 103 Stat. 2403; Pub. L. 108-357, title VIII, Sec. 818(a), Oct. 22, 2004, 118 Stat. 1418; Pub. L. 115-141, Div. U, title IV, Sec. 401(a)(314), Mar. 23, 2018, 132 Stat. 348.)
Background Notes
AMENDMENTS
2018 - Subsec. (a). Pub. L. 115-141, Div. U, Sec. 401(a)(314), amended subsec. (a) by substituting “$1,000” for “the
$1,000”.
2004 - Subsec. (a). Pub. L. 108-357, Sec. 818(a), added the sentence at the end.
1989 - Subsec. (a). Pub. L. 101-239, Sec. 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, Sec. 7734(a)(1), inserted ‘(directly or indirectly)’ after ‘participates’.
Subsec. (a)(2). Pub. L. 101-239, Sec. 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’.
EFFECTIVE DATE OF 2018 AMENDMENT
Amendment by Pub. L. 115-141, Div. U, Sec. 401(a)(314), effective March 23, 2018.
EFFECTIVE DATE OF 2004 AMENDMENT
Section 818(b) of Pub. L. 108-357 provided that: “The amendment made by this section shall apply to activities after
the date of the enactment of this Act [Enacted: Oct. 22, 2004].”
EFFECTIVE DATE OF 1989 AMENDMENT
Section 7734(b) of Pub. L. 101-239 provided that: “The amendment made by subsection
(a) (amending this section) shall apply to activities after December 31, 1989.”
EFFECTIVE DATE OF 1984 AMENDMENT
Section 143(c) of Pub. L. 98-369 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 (July 18, 1984).”
EFFECTIVE DATE
Section 320(c) of Pub. L. 97-248 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 (Sept. 3, 1982).”
REPORT ON TAX SHELTER PENALTIES AND CERTAIN OTHER ENFORCEMENT ACTIONS
Section 2103 of Pub. L. 111-240 provided:
“(a) In General.—The Commissioner of Internal Revenue, in consultation with the Secretary
of the Treasury, shall submit to the Committee on Ways and Means of the House of Representatives
and the Committee on Finance of the Senate an annual report on the penalties assessed
by the Internal Revenue Service during the preceding year under each of the following
provisions of the Internal Revenue Code of 1986:
“(1) Section 6662A (relating to accuracy-related penalty on understatements with respect
to reportable transactions).
“(2) Section 6700(a) (relating to promoting abusive tax shelters).
“(3) Section 6707 (relating to failure to furnish information regarding reportable
transactions).
“(4) Section 6707A (relating to failure to include reportable transaction information
with return).
“(5) Section 6708 (relating to failure to maintain lists of advisees with respect
to reportable transactions).
“(b) Additional Information.—The report required under subsection (a) shall also include
information on the following with respect to each year:
“(1) Any action taken under section 330(b)
of title 31, United States Code, with respect to any reportable transaction
(as defined in section 6707A(c) of the Internal Revenue Code of 1986).
“(2) Any extension of the time for assessment of tax enforced, or assessment of any
amount under such an extension, under paragraph (10) of section 6501(c)
of the Internal Revenue Codeof 1986.
“(c) Date of Report.—The first report required under subsection (a) shall be submitted
not later than December 31, 2010.”
