The Senate Feb. 9 passed legislation (S. 2917) that would limit penalties for individuals and businesses that invest in tax shelters by tying fines to the value of tax benefits received.
The Small Business Penalty Fairness Act, passed by unanimous consent, sets the penalty for failure to disclose reportable transactions to the Internal Revenue Service at 75 percent of the tax benefit received, to prevent small businesses and individuals from facing huge penalties on transactions that yielded relatively small benefits.
Still, the legislation, introduced last December, carries a minimum penalty of $5,000 for individuals and $10,000 for corporations. A maximum penalty of $100,000 for individuals and $200,000 for corporations would be established under the bill. The fines would be imposed on investments in transactions that the IRS has identified as listed tax shelters, or that have characteristics of tax shelters, including large losses or confidentiality agreements.
Similar legislation (H.R. 4068) has also been introduced in the House by Ways and Means Committee member John Lewis (D-Ga.), but no action has been taken yet in that chamber.
Text of the S. 2917 is available at http://op.bna.com/dt.nsf/id/egrr-82jq53.