WASHINGTON, DC 20224
LARGE BUSINESS AND INTERNATIONAL DIVISION
LB&I Control No.: LB&I-20-0211-001 Impacted IRM: 20.1.1,20.1.5
January 19, 2011
MEMORANDUM FOR INDUSTRY DIRECTORS DIRECTOR, FIELD SPECIALISTS DIRECTOR, INTERNATIONAL BUSINESS COMPLIANCE DIRECTOR, INTERNATIONAL INDIVIDUAL COMPLIANCE
FROM: Cheryl P. Claybaugh /s/ Cheryl P. Claybaugh
~ Director, Pre-Filing and Technical Guidance
SUBJECT: Amended IRC Section 6707A Penalty -Interim Procedures
The purpose of this memorandum is to provide guidance on applying the Section 6707A
penalty provisions amended by the Small Business Jobs Act of 2010 that was enacted
on September 27, 2010. The amount of the penalty was changed, but the application of
the Section 6707A penalty did not change. The amendment applies to penalties
assessed after December 31,2006.
Prior to the Act, the amount of the penalty was unrelated to the tax shown on the tax
return as a result of the reportable transaction. Under the amendment, the penalty is
"75 percent of the decrease in tax shown on the return" as a result of the reportable
transaction. The maximum penalty in the case of a listed transaction is $100,000 for a
natural person and $200,000 for all other taxpayers and in the case of a non-listed
reportable transaction is $10,000 for a natural person and $50,000 for all other
taxpayers. The minimum penalty for both listed transactions and non-listed reportable
transactions is $5,000 for a natural person and $10,000 for all other taxpayers.
Procedures are being developed to centralize processing of closed cases (i.e.
calculation of new penalty amounts, processing of partial abatements, and notices to
impacted taxpayers). Revised case processing procedures for open and future cases
will be developed.