Senate Passes Bill to Limit Reportable Transaction Penalties


The Senate passed a bill (S. 2917) Tuesday that would modify the amount of the penalty for failure to report tax shelter transactions under IRC § 6707A. The Small Business Penalty Fairness Act of 2009 passed by unanimous consent.

The bill would set the amount of the penalty under section 6707A at 75% of the decrease in tax that resulted from the reportable transaction, subject to new minimum and maximum amounts.

The bill would turn the current penalty amounts into the maximum penalty and would institute a new minimum penalty amount of $10,000 ($5,000 for individuals).

The current penalty amounts under section 6707A have been criticized because they bear no relation to the tax savings from the transaction. Currently the penalty is $10,000 for individuals and $50,000 for other taxpayers or, in the case of listed transactions, $100,000 for individuals and $200,000 in all other cases.

The IRS has a moratorium in place on collection enforcement under section 6707A. The moratorium applies to cases in which the annual tax benefit from the transaction is less than the otherwise applicable penalty. The moratorium is scheduled to run until March 1. The IRS is also refraining from placing liens on taxpayers’ property where the amount due solely relates to the section 6707A penalty.

Under the bill, the new penalty amounts would apply retroactively to penalties assessed after Dec. 31, 2006.

A similar bill in the House of Representatives (H.R. 4068) was referred to the Ways and Means Committee in November.

SPONSORED WHITE PAPER

Preparing the statement of cash flows

This instructive white paper outlines common pitfalls in the preparation of the statement of cash flows, resources to minimize these risks, and four critical skills your staff will need as you approach necessary changes to the process.

RESOURCES

Keeping you informed and prepared amid the coronavirus crisis

We’re gathering the latest news stories along with relevant columns, tips, podcasts, and videos on this page, along with curated items from our archives to help with uncertainty and disruption.