Page:United States Statutes at Large Volume 121.djvu/224

 PUBLIC LAW 110–28—MAY 25, 2007

121 STAT. 203

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(b) MODIFICATION OF PENALTY FOR UNDERSTATEMENT OF TAXPAYER’S LIABILITY BY TAX RETURN PREPARER.—Subsections (a) and (b) of section 6694 are amended to read as follows: ‘‘(a) UNDERSTATEMENT DUE TO UNREASONABLE POSITIONS.— ‘‘(1) IN GENERAL.—Any tax return preparer who prepares any return or claim for refund with respect to which any part of an understatement of liability is due to a position described in paragraph (2) shall pay a penalty with respect to each such return or claim in an amount equal to the greater of— ‘‘(A) $1,000, or ‘‘(B) 50 percent of the income derived (or to be derived) by the tax return preparer with respect to the return or claim. ‘‘(2) UNREASONABLE POSITION.—A position is described in this paragraph if— ‘‘(A) the tax return preparer knew (or reasonably should have known) of the position, ‘‘(B) there was not a reasonable belief that the position would more likely than not be sustained on its merits, and ‘‘(C)(i) the position was not disclosed as provided in section 6662(d)(2)(B)(ii), or ‘‘(ii) there was no reasonable basis for the position. ‘‘(3) REASONABLE CAUSE EXCEPTION.—No penalty shall be imposed under this subsection if it is shown that there is reasonable cause for the understatement and the tax return preparer acted in good faith. ‘‘(b) UNDERSTATEMENT DUE TO WILLFUL OR RECKLESS CONDUCT.— ‘‘(1) IN GENERAL.—Any tax return preparer who prepares any return or claim for refund with respect to which any part of an understatement of liability is due to a conduct described in paragraph (2) shall pay a penalty with respect to each such return or claim in an amount equal to the greater of— ‘‘(A) $5,000, or ‘‘(B) 50 percent of the income derived (or to be derived) by the tax return preparer with respect to the return or claim. ‘‘(2) WILLFUL OR RECKLESS CONDUCT.—Conduct described in this paragraph is conduct by the tax return preparer which is— ‘‘(A) a willful attempt in any manner to understate the liability for tax on the return or claim, or ‘‘(B) a reckless or intentional disregard of rules or regulations. ‘‘(3) REDUCTION IN PENALTY.—The amount of any penalty payable by any person by reason of this subsection for any return or claim for refund shall be reduced by the amount of the penalty paid by such person by reason of subsection (a).’’. (c) EFFECTIVE DATE.—The amendments made by this section shall apply to returns prepared after the date of the enactment of this Act.

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26 USC 6694.

26 USC 6060 note.

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