§ 6662A. Imposition of accuracy-related penalty on understatements with respect to reportable transactions

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(a)Imposition of penalty If a taxpayer has a reportable transaction understatement for any taxable year, there shall be added to the tax an amount equal to 20 percent of the amount of such understatement.

(b)Reportable transaction understatement For purposes of this section—

(1)In general The term “reportable transaction understatement” means the sum of—

(A)the product of—

(i)the amount of the increase (if any) in taxable income which results from a difference between the proper tax treatment of an item to which this section applies and the taxpayer’s treatment of such item (as shown on the taxpayer’s return of tax), and

(ii)the highest rate of tax imposed by section 1 (section 11 in the case of a taxpayer which is a corporation), and

(B)the amount of the decrease (if any) in the aggregate amount of credits determined under subtitle A which results from a difference between the taxpayer’s treatment of an item to which this section applies (as shown on the taxpayer’s return of tax) and the proper tax treatment of such item.

For purposes of subparagraph (A), any reduction of the excess of deductions allowed for the taxable year over gross income for such year, and any reduction in the amount of capital losses which would (without regard to section 1211) be allowed for such year, shall be treated as an increase in taxable income.

(2)Items to which section applies This section shall apply to any item which is attributable to—

(A)any listed transaction, and

(B)any reportable transaction (other than a listed transaction) if a significant purpose of such transaction is the avoidance or evasion of Federal income tax.

(c)Higher penalty for nondisclosed listed and other avoidance transactions Subsection

(a)shall be applied by substituting “30 percent” for “20 percent” with respect to the portion of any reportable transaction understatement with respect to which the requirement of section 6664(d)(3)(A) is not met.

(d)Definitions of reportable and listed transactions For purposes of this section, the terms “reportable transaction” and “listed transaction” have the respective meanings given to such terms by section 6707A(c).

(e)Special rules

(1)Coordination with penalties, etc., on other understatements In the case of an understatement (as defined in section 6662(d)(2))—

(A)the amount of such understatement (determined without regard to this paragraph) shall be increased by the aggregate amount of reportable transaction understatements for purposes of determining whether such understatement is a substantial understatement under section 6662(d)(1), and

(B)the addition to tax under section 6662(a) shall apply only to the excess of the amount of the substantial understatement (if any) after the application of subparagraph

(A)over the aggregate amount of reportable transaction understatements.

(2)Coordination with other penalties

(A)Coordination with fraud penalty This section shall not apply to any portion of an understatement on which a penalty is imposed under section 6663.

(B)Coordination with certain increased underpayment penalties This section shall not apply to any portion of an understatement on which a penalty is imposed under section 6662 if the rate of the penalty is determined under subsections

(h)or

(i)of section 6662.

(3)Special rule for amended returns Except as provided in regulations, in no event shall any tax treatment included with an amendment or supplement to a return of tax be taken into account in determining the amount of any reportable transaction understatement 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.

(Added Pub. L. 108–357, title VIII, § 812(a), Oct. 22, 2004, 118 Stat. 1577; amended Pub. L. 109–135, title IV, § 403(x)(2), Dec. 21, 2005, 119 Stat. 2629; Pub. L. 111–152, title I, § 1409(b)(3), Mar. 30, 2010, 124 Stat. 1069; Pub. L. 113–295, div. A, title II, § 220(w), Dec. 19, 2014, 128 Stat. 4036.)

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