26 U.S.C. § 6664 — Definitions and special rules

Page 3780 TITLE 26—INTERNAL REVENUE CODE § 6663 after Mar. 30, 2010, see section 1409(e)(2) of Pub. L. 111–152, set out as a note under section 6662 of this title. EFFECTIVE DATE OF 2005 AMENDMENT Amendment by Pub. L. 109–135 effective as if included in the provision of the American Jobs Creation Act of 2004, Pub. L. 108–357, to which such amendment relates, see section 403(nn) of Pub. L. 109–135, set out as a note under section 26 of this title. EFFECTIVE DATE Section applicable to taxable years ending after Oct. 22, 2004, see section 812(f) of Pub. L. 108–357, set out as an Effective Date of 2004 Amendment note under sec- tion 6662 of this title. REPORT ON TAX SHELTER PENALTIES AND CERTAIN OTHER ENFORCEMENT ACTIONS Pub. L. 111–240, title II, § 2103, Sept. 27, 2010, 124 Stat. 2564, provided that: ‘‘(a) IN GENERAL.—The Commissioner of Internal Rev- enue, in consultation with the Secretary of the Treas- ury, 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 pen- alties assessed by the Internal Revenue Service during the preceding year under each of the following provi- sions of the Internal Revenue Code of 1986: ‘‘(1) Section 6662A (relating to accuracy-related penalty on understatements with respect to report- able transactions). ‘‘(2) Section 6700(a) (relating to promoting abusive tax shelters). ‘‘(3) Section 6707 (relating to failure to furnish in- formation regarding reportable transactions). ‘‘(4) Section 6707A (relating to failure to include re- portable transaction information with return). ‘‘(5) Section 6708 (relating to failure to maintain lists of advisees with respect to reportable trans- actions). ‘‘(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) [now 330(c)] 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 Code of 1986. ‘‘(c) DATE OF REPORT.—The first report required under subsection (a) shall be submitted not later than December 31, 2010.’’ § 6663. Imposition of fraud penalty (a) Imposition of penalty If any part of any underpayment of tax re- quired 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 attrib- utable to fraud, except with respect to any por- tion 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. (Added Pub. L. 101–239, title VII, § 7721(a), Dec. 19, 1989, 103 Stat. 2397.) Statutory Notes and Related Subsidiaries EFFECTIVE DATE Section 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 sec- tion 461 of this title. § 6664. Definitions and special rules (a) Underpayment For purposes of this part, the term ‘‘under- payment’’ means the amount by which any tax imposed by this title 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 as- sessed (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. A rule similar to the rule of section 6211(b)(4) shall apply for purposes of this subsection. (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 for underpay- ments (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. (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). (3) Special rule for certain valuation overstate- ments In the case of any underpayment attrib- utable 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 overstate- ment under chapter 1 if— (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 investiga- Page 3781 TITLE 26—INTERNAL REVENUE CODE § 6664 tion of the value of the contributed prop- erty. (4) Definitions For purposes of this subsection— (A) Charitable deduction property The term ‘‘charitable deduction property’’ means any property contributed by the tax- payer in a contribution for which a deduc- tion was claimed under section 170. For pur- poses 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 secu- rities market. (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). (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 report- able transaction understatement if it is shown that there was a reasonable cause for such por- tion and that the taxpayer acted in good faith with respect to such portion. (2) Exception Paragraph (1) shall not apply to any portion of a reportable transaction understatement which is attributable to one or more trans- actions described in section 6662(b)(6). (3) Special rules Paragraph (1) shall not apply to any report- able transaction understatement unless— (A) the relevant facts affecting the tax treatment of the item are adequately dis- closed 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 re- scinded under section 6707A(d). (4) Rules relating to reasonable belief For purposes of paragraph (3)(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 re- solved 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 be- lief 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 par- ticipates in the organization, manage- ment, promotion, or sale of the trans- action or is related (within the meaning of section 267(b) or 707(b)(1)) to any per- son who so participates, (II) is compensated directly or indi- rectly by a material advisor with respect to the transaction, (III) has a fee arrangement with re- spect to the transaction which is contin- gent on all or part of the intended tax benefits from the transaction being sus- tained, or (IV) as determined under regulations prescribed by the Secretary, has a dis- qualifying 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 assump- tions as to future events), (II) unreasonably relies on representa- tions, statements, findings, or agree- ments of the taxpayer or any other per- son, (III) does not identify and consider all relevant facts, or (IV) fails to meet any other require- ment as the Secretary may prescribe. (Added Pub. L. 101–239, title VII, § 7721(a), Dec. 19, 1989, 103 Stat. 2398; amended Pub. L. 108–357, title VIII, § 812(c), Oct. 22, 2004, 118 Stat. 1579; Pub. L. 109–280, title XII, § 1219(a)(3), (c)(2), Aug. 17, 2006, 120 Stat. 1084, 1085; Pub. L. 111–152, title I, § 1409(c), Mar. 30, 2010, 124 Stat. 1069; Pub. L. 114–113, div. Q, title II, § 209(a), Dec. 18, 2015, 129 Stat. 3084; Pub. L. 117–328, div. T, title VI, § 605(a)(2)(C), Dec. 29, 2022, 136 Stat. 5394.) Editorial Notes CODIFICATION Section 1409(c) of Pub. L. 111–152, which directed the amendment of section 6664 without specifying the act to be amended, was executed to this section, which is section 6664 of the Internal Revenue Code of 1986, to re- flect the probable intent of Congress. See 2010 Amend- ment notes below. Page 3782 TITLE 26—INTERNAL REVENUE CODE § 6665 Section 1219(a)(3), (c)(2) of Pub. L. 109–280, which di- rected the amendment of section 6664 without speci- fying the act to be amended, was executed to this sec- tion, which is section 6664 of the Internal Revenue Code of 1986, to reflect the probable intent of Congress. See 2006 Amendment notes below. AMENDMENTS 2022—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. 2015—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.’’ 2010—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. Subsec. (c)(4)(A). Pub. L. 111–152, § 1409(c)(1)(B), sub- stituted ‘‘paragraph (3)’’ for ‘‘paragraph (2)’’. See Codi- fication note above. 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. Subsec. (d)(4). Pub. L. 111–152, § 1409(c)(2)(B), sub- stituted ‘‘paragraph (3)(C)’’ for ‘‘paragraph (2)(C)’’ in in- troductory provisions. See Codification note above. Pub. L. 111–152, § 1409(c)(2)(A), redesignated par. (3) as (4). See Codification note above. 2006—Subsec. (c)(2). Pub. L. 109–280, § 1219(a)(3), sub- stituted ‘‘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. 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 ap- praiser’ means any appraiser meeting the requirements of the regulations prescribed under section 170(a)(1). ‘‘(C) QUALIFIED APPRAISAL.—The term ‘qualified ap- praisal’ means any appraisal meeting the requirements of the regulations prescribed under section 170(a)(1).’’ See Codification note above. 2004—Subsec. (c). Pub. L. 108–357, § 812(c)(2)(B), in- serted ‘‘for underpayments’’ after ‘‘exception’’ in head- ing. Subsec. (c)(1). Pub. L. 108–357, § 812(c)(2)(A), sub- stituted ‘‘section 6662 or 6663’’ for ‘‘this part’’. Subsec. (d). Pub. L. 108–357, § 812(c)(1), added subsec. (d). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2022 AMENDMENT Amendment by Pub. L. 117–328 applicable to contribu- tions 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. EFFECTIVE DATE OF 2015 AMENDMENT Pub. L. 114–113, div. Q, title II, § 209(d)(1), Dec. 18, 2015, 129 Stat. 3085, provided that: ‘‘The amendment made by subsection (a) [amending this section] shall apply to— ‘‘(A) returns filed after the date of the enactment of this Act [Dec. 18, 2015], and ‘‘(B) returns filed on or before such date if the pe- riod specified in section 6501 of the Internal Revenue Code of 1986 for assessment of the taxes with respect to which such return relates has not expired as of such date.’’ EFFECTIVE DATE OF 2010 AMENDMENT Amendment by section 1409(c)(1) of Pub. L. 111–152 ap- plicable to underpayments attributable to transactions entered into after Mar. 30, 2010, see section 1409(e)(2) of Pub. L. 111–152, set out as a note under section 6662 of this title. Amendment by section 1409(c)(2) of Pub. L. 111–152 ap- plicable to understatements attributable to trans- actions entered into after Mar. 30, 2010, see section 1409(e)(3) of Pub. L. 111–152, set out as a note under sec- tion 6662 of this title. EFFECTIVE DATE OF 2006 AMENDMENT Amendment by section 1219(a)(3) of Pub. L. 109–280 ap- plicable to returns filed after Aug. 17, 2006, with special rule for certain easements, see section 1219(e)(1), (3), of Pub. L. 109–280, set out as a note under section 170 of this title. Amendment by section 1219(c)(2) of Pub. L. 109–280 ap- plicable to appraisals prepared with respect to returns or submissions filed after Aug. 17, 2006, see section 1219(e)(2) of Pub. L. 109–280, set out as a note under sec- tion 170 of this title. EFFECTIVE DATE OF 2004 AMENDMENT Amendment by Pub. L. 108–357 applicable to taxable years ending after Oct. 22, 2004, with special rule for ap- plication of subsec. (d)(3)(B) [now (d)(4)(B)] of this sec- tion, see section 812(f) of Pub. L. 108–357, as amended, set out as a note under section 6662 of this title. EFFECTIVE DATE Section 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 sec- tion 461 of this title. PART III—APPLICABLE RULES Sec. 6665. Applicable rules. Editorial Notes AMENDMENTS 1989—Pub. L. 101–239, title VII, § 7721(a), Dec. 19, 1989, 103 Stat. 2398, added part heading and analysis. § 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 chap- ter 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’’ im- posed by this title shall be deemed also to refer to the additions to the tax, additional amounts, and penalties provided by this chap- ter. (b) Procedure for assessing certain additions to tax For purposes of subchapter B of chapter 63 (re- lating to deficiency procedures for income, es- tate, 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 de- scribed in section 6211; or (2) to an addition described in section 6654 or 6655, if no return is filed for the taxable year. (Added Pub. L. 101–239, title VII, § 7721(a), Dec. 19, 1989, 103 Stat. 2399.)