Proposed regulations: Penalty for failure to disclose reportable transactions

Penalty for failure to disclose reportable transactions

The Treasury Department and IRS today released for publication in the Federal Register proposed regulations (REG-103033-11) as guidance concerning the amount of the penalty imposed under section 6707A for a failure to include, on any return or statement, any information required to be disclosed under section 6011 relating to reportable transactions.

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Section 6707A imposes a penalty on a taxpayer who has a duty to disclose a reportable transaction and fails to do so, and also requires certain taxpayers to disclose to the Securities and Exchange Commission (SEC) a requirement to pay a penalty relating to listed transactions or undisclosed reportable transactions. 

Proposed regulations

According to the preamble, the proposed regulations are necessary to clarify the amount of the penalty under section 6707A, as amended by the Small Business Jobs Act of 2010, Pub. L. No. 111-240.


The proposed regulations [PDF 243 KB] include provisions that:

  • Streamline the references to original returns, amended returns, and applications for tentative refunds by defining all three under the term “return”
  • Include in the definition of the decrease in tax “any other tax that result from participation in the reportable transaction but was not reported on the taxpayer’s return” so as to capture, for example, an excise tax on excess IRA contributions 
  • Clarify that the decrease in tax is determined separately for each year of participation in the reportable transaction, and that the amount of the penalty will be 75% of the aggregate decrease in tax in all years for which the disclosure was required (subject to minimum and maximum penalty amount limitations) 
  • Clarify that in the case of a failure to make a disclosure to the SEC pursuant to section 6707A(e), the penalty amount will be the penalty generally applicable under section 6707A(b)—i.e., 75% of the decrease in tax—and not the maximum penalty set forth in section 6707(b)(2) as cited in section 6707A(e) 
  • Clarify the rues relating to the minimum and maximum limit amounts of the penalty, and provide that these limits are to be applied separately to each individual penalty

Comments and requests for a public hearing on the proposed regulations must be received by a date that is 90 days after August 28, 2015 (the date when these regulations will be published in the Federal Register).

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