Frequently Asked Questions
Who is eligible for the Rescission of Reportable Transaction Penalty?
Applies to taxpayers who have been assessed a penalty under Section 6707A for a reportable transaction (other than a listed transaction) where rescinding the penalty would promote compliance and effective tax administration.
How does the Rescission of Reportable Transaction Penalty work?
The Commissioner of Internal Revenue has the authority to rescind all or any portion of a penalty imposed for failing to include reportable transaction information on a return, provided it is not a 'listed transaction'.
What law authorizes the Rescission of Reportable Transaction Penalty?
The Rescission of Reportable Transaction Penalty is authorized under IRC §6707A of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §6707A
Source: Internal Revenue Code, Title 26, United States Code
§ 6707A. Penalty for failure to include reportable transaction information with return(a) Imposition of penaltyAny person who fails to include on any return or statement any information with respect to a reportable transaction which is required under section 6011 to be included with such return or statement shall pay a penalty in the amount determined under subsection (b).
(b) Amount of penalty(1) In generalExcept as otherwise provided in this subsection, the amount of the penalty under subsection (a) with respect to any reportable transaction shall be 75 percent of the decrease in tax shown on the return as a result of such transaction (or which would have resulted from such transaction if such transaction were respected for Federal tax purposes).
(2) Maximum penaltyThe amount of the penalty under subsection (a) with respect to any reportable transaction shall not exceed—(A) in the case of a listed transaction, $200,000 ($100,000 in the case of a natural person), or
(B) in the case of any other reportable transaction, $50,000 ($10,000 in the case of a natural person).
(3) Minimum penaltyThe amount of the penalty under subsection (a) with respect to any transaction shall not be less than $10,000 ($5,000 in the case of a natural person).
(c) DefinitionsFor purposes of this section:(1) Reportable transactionThe term “reportable transaction” means any transaction with respect to which information is required to be included with a return or statement because, as determined under regulations prescribed under section 6011, such transaction is of a type which the Secretary determines as having a potential for tax avoidance or evasion.
(2) Listed transactionThe term “listed transaction” means a reportable transaction which is the same as, or substantially similar to, a transaction specifically identified by the Secretary as a tax avoidance transaction for purposes of section 6011.
(d) Authority to rescind penalty(1) In generalThe Commissioner of Internal Revenue may rescind all or any portion of any penalty imposed by this section with respect to any violation if—(A) the violation is with respect to a reportable transaction other than a listed transaction, and
(B) rescinding the penalty would promote compliance with the requirements of this title and effective tax administration.
(2) No judicial appealNotwithstanding any other provision of law, any determination under this subsection may not be reviewed in any judicial proceeding.
(3) RecordsIf a penalty is rescinded under paragraph (1), the Commissioner shall place in the file in the Office of the Commissioner the opinion of the Commissioner with respect to the determination, including—(A) a statement of the facts and circumstances relating to the violation,
(B) the reasons for the rescission, and
(C) the amount of the penalty rescinded.
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