Page:United States Statutes at Large Volume 124.djvu/1095

 124 STAT. 1069 PUBLIC LAW 111–152—MAR. 30, 2010 (1) IN GENERAL.—Subsection (b) of section 6662 is amended by inserting after paragraph (5) the following new paragraph: ‘‘(6) Any disallowance of claimed tax benefits by reason of a transaction lacking economic substance (within the meaning of section 7701(o)) or failing to meet the requirements of any similar rule of law.’’. (2) INCREASED PENALTY FOR NONDISCLOSED TRANS- ACTIONS.—Section 6662 is amended by adding at the end the following new subsection: ‘‘(i) INCREASE IN PENALTY IN CASE OF NONDISCLOSED NON- ECONOMIC SUBSTANCE TRANSACTIONS.— ‘‘(1) IN GENERAL.—In the case of any portion of an under- payment which is attributable to one or more nondisclosed noneconomic substance transactions, subsection (a) shall be applied with respect to such portion by substituting ‘40 percent’ for ‘20 percent’. ‘‘(2) NONDISCLOSED NONECONOMIC SUBSTANCE TRANS- ACTIONS.—For purposes of this subsection, the term ‘nondis- closed noneconomic substance transaction’ means any portion of a transaction described in subsection (b)(6) with respect to which the relevant facts affecting the tax treatment are not adequately disclosed in the return nor in a statement attached to the return. ‘‘(3) SPECIAL RULE FOR AMENDED RETURNS.—In no event shall any amendment or supplement to a return of tax be taken into account for purposes of this subsection if the amend- ment or supplement is filed after the earlier of the date the taxpayer is first contacted by the Secretary regarding the exam- ination of the return or such other date as is specified by the Secretary.’’. (3) CONFORMING AMENDMENT.—Subparagraph (B) of section 6662A(e)(2) is amended— (A) by striking ‘‘section 6662(h)’’ and inserting ‘‘sub- sections (h) or (i) of section 6662’’; and (B) by striking ‘‘GROSS VALUATION MISSTATEMENT PEN- ALTY’’ in the heading and inserting ‘‘CERTAIN INCREASED UNDERPAYMENT PENALTIES’’. (c) REASONABLE CAUSE EXCEPTION NOT APPLICABLE TO NON- ECONOMIC SUBSTANCE TRANSACTIONS.— (1) REASONABLE CAUSE EXCEPTION FOR UNDERPAYMENTS.— Subsection (c) of section 6664 is amended— (A) by redesignating paragraphs (2) and (3) as para- graphs (3) and (4), respectively; (B) by striking ‘‘paragraph (2)’’ in paragraph (4)(A), as so redesignated, and inserting ‘‘paragraph (3)’’; and (C) by inserting after paragraph (1) the following new paragraph: ‘‘(2) EXCEPTION.—Paragraph (1) shall not apply to any por- tion of an underpayment which is attributable to one or more transactions described in section 6662(b)(6).’’. (2) REASONABLE CAUSE EXCEPTION FOR REPORTABLE TRANS- ACTION UNDERSTATEMENTS.—Subsection (d) of section 6664 is amended— (A) by redesignating paragraphs (2) and (3) as para- graphs (3) and (4), respectively; (B) by striking ‘‘paragraph (2)(C)’’ in paragraph (4), as so redesignated, and inserting ‘‘paragraph (3)(C)’’; and 26 USC 6664. 26 USC 6662A. Definition. Applicability. 26 USC 6662.