26 U.S.C. § 6702 — Frivolous tax submissions

Page 3806 TITLE 26—INTERNAL REVENUE CODE § 6701 tion [enacting this section] shall take effect on the day after the date of the enactment of this Act [Sept. 3, 1982].’’ § 6701. Penalties for aiding and abetting under- statement of tax liability (a) Imposition of penalty Any person— (1) who aids or assists in, procures, or ad- vises with respect to, the preparation or pres- entation of any portion of a return, affidavit, claim, or other document, (2) who knows (or has reason to believe) that such portion will be used in connection with any material matter arising under the inter- nal revenue laws, and (3) who knows that such portion (if so used) would result in an understatement of the li- ability for tax of another person, shall pay a penalty with respect to each such document in the amount determined under sub- section (b). (b) Amount of penalty (1) In general Except as provided in paragraph (2), the amount of the penalty imposed by subsection (a) shall be $1,000. (2) Corporations If the return, affidavit, claim, or other docu- ment relates to the tax liability of a corpora- tion, the amount of the penalty imposed by subsection (a) shall be $10,000. (3) Only 1 penalty per person per period If any person is subject to a penalty under subsection (a) with respect to any document relating to any taxpayer for any taxable pe- riod (or where there is no taxable period, any taxable event), such person shall not be sub- ject to a penalty under subsection (a) with re- spect to any other document relating to such taxpayer for such taxable period (or event). (c) Activities of subordinates (1) In general For purposes of subsection (a), the term ‘‘procures’’ includes— (A) ordering (or otherwise causing) a sub- ordinate to do an act, and (B) knowing of, and not attempting to pre- vent, participation by a subordinate in an act. (2) Subordinate For purposes of paragraph (1), the term ‘‘subordinate’’ means any other person (wheth- er or not a director, officer, employee, or agent of the taxpayer involved) over whose ac- tivities the person has direction, supervision, or control. (d) Taxpayer not required to have knowledge Subsection (a) shall apply whether or not the understatement is with the knowledge or con- sent of the persons authorized or required to present the return, affidavit, claim, or other document. (e) Certain actions not treated as aid or assist- ance For purposes of subsection (a)(1), a person fur- nishing typing, reproducing, or other mechan- ical assistance with respect to a document shall not be treated as having aided or assisted in the preparation of such document by reason of such assistance. (f) Penalty in addition to other penalties (1) In general Except as provided by paragraphs (2) and (3), the penalty imposed by this section shall be in addition to any other penalty provided by law. (2) Coordination with return preparer pen- alties No penalty shall be assessed under sub- section (a) or (b) of section 6694 on any person with respect to any document for which a pen- alty is assessed on such person under sub- section (a). (3) Coordination with section 6700 No penalty shall be assessed under section 6700 on any person with respect to any docu- ment for which a penalty is assessed on such person under subsection (a). (Added Pub. L. 97–248, title III, § 324(a), Sept. 3, 1982, 96 Stat. 615; amended Pub. L. 101–239, title VII, § 7735(a), (b), Dec. 19, 1989, 103 Stat. 2403.) Editorial Notes AMENDMENTS 1989—Subsec. (a)(1). Pub. L. 101–239, § 7735(a)(1), struck out ‘‘in connection with any matter arising under the internal revenue laws’’ after ‘‘other document’’. Subsec. (a)(2). Pub. L. 101–239, § 7735(a)(2), inserted ‘‘(or has reason to believe)’’ after ‘‘who knows’’. Subsec. (a)(3). Pub. L. 101–239, § 7735(a)(3), substituted ‘‘would result’’ for ‘‘will result’’. Subsec. (f)(1). Pub. L. 101–239, § 7735(b)(2), substituted ‘‘paragraphs (2) and (3)’’ for ‘‘paragraph (2)’’. Subsec. (f)(3). Pub. L. 101–239, § 7735(b)(1), added par. (3). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1989 AMENDMENT Pub. L. 101–239, title VII, § 7735(c), Dec. 19, 1989, 103 Stat. 2404, provided that: ‘‘The amendments made by this section [amending this section] shall take effect on December 31, 1989.’’ EFFECTIVE DATE Pub. L. 97–248, title III, § 324(c), Sept. 3, 1982, 96 Stat. 616, provided that: ‘‘The amendments made by this sec- tion [enacting this section] shall take effect on the day after the date of the enactment of this Act [Sept. 3, 1982].’’ § 6702. Frivolous tax submissions (a) Civil penalty for frivolous tax returns A person shall pay a penalty of $5,000 if— (1) such person files what purports to be a re- turn of a tax imposed by this title but which— (A) does not contain information on which the substantial correctness of the self-as- sessment may be judged, or (B) contains information that on its face indicates that the self-assessment is sub- stantially incorrect, and (2) the conduct referred to in paragraph (1)— (A) is based on a position which the Sec- retary has identified as frivolous under sub- section (c), or Page 3807 TITLE 26—INTERNAL REVENUE CODE § 6703 (B) reflects a desire to delay or impede the administration of Federal tax laws. (b) Civil penalty for specified frivolous submis- sions (1) Imposition of penalty Except as provided in paragraph (3), any per- son who submits a specified frivolous submis- sion shall pay a penalty of $5,000. (2) Specified frivolous submission For purposes of this section— (A) Specified frivolous submission The term ‘‘specified frivolous submission’’ means a specified submission if any portion of such submission— (i) is based on a position which the Sec- retary has identified as frivolous under subsection (c), or (ii) reflects a desire to delay or impede the administration of Federal tax laws. (B) Specified submission The term ‘‘specified submission’’ means— (i) a request for a hearing under— (I) section 6320 (relating to notice and opportunity for hearing upon filing of notice of lien), or (II) section 6330 (relating to notice and opportunity for hearing before levy), and (ii) an application under— (I) section 6159 (relating to agreements for payment of tax liability in install- ments), (II) section 7122 (relating to com- promises), or (III) section 7811 (relating to taxpayer assistance orders). (3) Opportunity to withdraw submission If the Secretary provides a person with no- tice that a submission is a specified frivolous submission and such person withdraws such submission within 30 days after such notice, the penalty imposed under paragraph (1) shall not apply with respect to such submission. (c) Listing of frivolous positions The Secretary shall prescribe (and periodically revise) a list of positions which the Secretary has identified as being frivolous for purposes of this subsection. The Secretary shall not include in such list any position that the Secretary de- termines meets the requirement of section 6662(d)(2)(B)(ii)(II). (d) Reduction of penalty The Secretary may reduce the amount of any penalty imposed under this section if the Sec- retary determines that such reduction would promote compliance with and administration of the Federal tax laws. (e) Penalties in addition to other penalties The penalties imposed by this section shall be in addition to any other penalty provided by law. (f) Partnership adjustments An administrative adjustment request under section 6227 and a partnership adjustment track- ing report under section 6226(b)(4)(A) shall be treated as a return for purposes of this section. (Added Pub. L. 97–248, title III, § 326(a), Sept. 3, 1982, 96 Stat. 617; amended Pub. L. 109–432, div. A, title IV, § 407(a), Dec. 20, 2006, 120 Stat. 2960; Pub. L. 115–141, div. U, title II, § 206(n)(4), Mar. 23, 2018, 132 Stat. 1182.) Editorial Notes AMENDMENTS 2018—Subsec. (f). Pub. L. 115–141 added subsec. (f). 2006—Pub. L. 109–432 amended section catchline and text generally, substituting provisions relating to civil penalties for frivolous tax returns and submissions, listing of frivolous positions, reduction of penalty to promote compliance with tax laws, and application of other penalties, consisting of subsecs. (a) to (e), for pro- visions relating to civil penalty for frivolous tax re- turns and application of other penalties, consisting of subsecs. (a) and (b). Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2018 AMENDMENT Amendment by Pub. L. 115–141 effective as if included in section 1101 of Pub. L. 114–74, see section 207 of Pub. L. 115–141, set out as a note under section 6031 of this title. EFFECTIVE DATE OF 2006 AMENDMENT Amendment by Pub. L. 109–432 applicable to submis- sions made and issues raised after the date on which the Secretary first prescribes a list under subsec. (c) of this section, see section 407(f) of Pub. L. 109–432, set out as a note under section 6320 of this title. EFFECTIVE DATE Pub. L. 97–248, title III, § 326(c), Sept. 3, 1982, 96 Stat. 617, provided that: ‘‘The amendments made by this sec- tion [enacting this section] shall apply with respect to documents filed after the date of the enactment of this Act [Sept. 3, 1982].’’ § 6703. Rules applicable to penalties under sec- tions 6700, 6701, and 6702 (a) Burden of proof In any proceeding involving the issue of whether or not any person is liable for a penalty under section 6700, 6701, or 6702, the burden of proof with respect to such issue shall be on the Secretary. (b) Deficiency procedures not to apply Subchapter B of chapter 63 (relating to defi- ciency procedures) shall not apply with respect to the assessment or collection of the penalties provided by sections 6700, 6701, and 6702. (c) Extension of period of collection where per- son pays 15 percent of penalty (1) In general If, within 30 days after the day on which no- tice and demand of any penalty under section 6700 or 6701 is made against any person, such person pays an amount which is not less than 15 percent of the amount of such penalty and files a claim for refund of the amount so paid, no levy or proceeding in court for the collec- tion of the remainder of such penalty shall be made, begun, or prosecuted until the final res- olution of a proceeding begun as provided in paragraph (2). Notwithstanding the provisions of section 7421(a), the beginning of such pro- ceeding or levy during the time such prohibi-