[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[S. 2851 Introduced in Senate (IS)]







110th CONGRESS
  2d Session
                                S. 2851

To amend the Internal Revenue Code of 1986 to modify the penalty on the 
    understatement of taxpayer's liability by tax return preparers.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 14, 2008

  Mr. Bunning (for himself, Mr. Conrad, and Mr. Hatch) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to modify the penalty on the 
    understatement of taxpayer's liability by tax return preparers.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. MODIFICATION OF PENALTY ON UNDERSTATEMENT OF TAXPAYER'S 
              LIABILITY BY TAX RETURN PREPARER.

    (a) In General.--Subsection (a) of section 6694 of the Internal 
Revenue Code of 1986 (relating to understatement due to unreasonable 
positions) is amended to read as follows:
    ``(a) Understatement Due to Unreasonable Positions.--
            ``(1) In general.--If a tax return preparer--
                    ``(A) prepares any return or claim of refund with 
                respect to which any part of an understatement of 
                liability is due to a position described in paragraph 
                (2), and
                    ``(B) knew (or reasonably should have known) of the 
                position,
        such tax return preparer shall pay a penalty with respect to 
        each such return or claim in an amount equal to the greater of 
        $1,000 or 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) In general.--Except as otherwise provided in 
                this paragraph, a position is described in this 
                paragraph unless there is or was substantial authority 
                for the position.
                    ``(B) Disclosed positions.--If the position was 
                disclosed as provided in section 6662(d)(2)(B)(ii) and 
                is not a position to which subparagraph (C) applies, 
                the position is described in this paragraph unless 
                there is a reasonable basis for the position.
                    ``(C) Tax shelters and reportable transactions.--If 
                the position is with respect to a tax shelter (as 
                defined in section 6662(d)(2)(C)(ii)) or a reportable 
                transaction to which section 6662A applies, the 
                position is described in this paragraph unless it is 
                reasonable to believe that the position would more 
                likely than not be sustained on its merits.
            ``(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) Effective Date.--The amendment made by this section shall apply 
to returns prepared after the date of the enactment of the Small 
Business and Work Opportunity Tax Act of 2007.
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