26 U.S.C. § 6700
Section 6700 · Promoting abusive tax shelters, etc.
Amended 5 times on record
Applied in 205 court decisions — leading case Neder v. United States (1999)
Most recently applied in James Tarpey v. United States (August 2023)
Cases citing this section usually also cite 26 U.S.C. § 7408 · 26 U.S.C. § 6703 · 26 U.S.C. § 7402
How often courts cite this section
Court decisions citing this, by year.Markers show enactment, consequential amendments, and circuit splits over this section — watch for a citation surge after a change or a disagreement. The dip in the last several years is a data-coverage gap, not a real trend — our corpus holds fewer opinions from the most recent years, so recent citations are undercounted.
Any person who—
organizes (or assists in the organization of)—
a partnership or other entity,
any investment plan or arrangement, or
any other plan or arrangement, or
participates (directly or indirectly) in the sale of any interest in an entity or plan or arrangement referred to in subparagraph (A), and
makes or furnishes or causes another person to make or furnish (in connection with such organization or sale)—
a statement with respect to the allowability of any deduction or credit, the excludability of any income, or the securing of any other tax benefit by reason of holding an interest in the entity or participating in the plan or arrangement which the person knows or has reason to know is false or fraudulent as to any material matter, or
a gross valuation overstatement as to any material matter,
shall pay, with respect to each activity described in paragraph (1), a penalty equal to $1,000 or, if the person establishes that it is lesser, 100 percent of the gross income derived (or to be derived) by such person from such activity. For purposes of the preceding sentence, activities described in paragraph (1)(A) with respect to each entity or arrangement shall be treated as a separate activity and participation in each sale described in paragraph (1)(B) shall be so treated. Notwithstanding the first sentence, if an activity with respect to which a penalty imposed under this subsection involves a statement described in paragraph (2)(A), the amount of the penalty shall be equal to 50 percent of the gross income derived (or to be derived) from such activity by the person on which the penalty is imposed.
For purposes of this section, the term “gross valuation overstatement” means any statement as to the value of any property or services if—
the value so stated exceeds 200 percent of the amount determined to be the correct valuation, and
the value of such property or services is directly related to the amount of any deduction or credit allowable under chapter 1 to any participant.
The Secretary may waive all or any part of the penalty provided by subsection (a) with respect to any gross valuation overstatement on a showing that there was a reasonable basis for the valuation and that such valuation was made in good faith.
The penalty imposed by this section shall be in addition to any other penalty provided by law.
Editorial notes U.S. Code · Office of the Law Revision Counsel
Amendments
2018—Subsec. (a). Pub. L. 115–141 substituted “$1,000” for “the $1,000” in concluding provisions.
2004—Subsec. (a). Pub. L. 108–357 inserted at end of concluding provisions “Notwithstanding the first sentence, if an activity with respect to which a penalty imposed under this subsection involves a statement described in paragraph (2)(A), the amount of the penalty shall be equal to 50 percent of the gross income derived (or to be derived) from such activity by the person on which the penalty is imposed.”
1989—Subsec. (a). Pub. L. 101–239, § 7734(a)(3), added concluding provision and struck out former concluding provision which read as follows: “shall pay a penalty equal to the greater of $1,000 or 20 percent of the gross income derived or to be derived by such person from such activity.”
Subsec. (a)(1)(B). Pub. L. 101–239, § 7734(a)(1), inserted “(directly or indirectly)” after “participates”.
Subsec. (a)(2). Pub. L. 101–239, § 7734(a)(2), inserted “or causes another person to make or furnish” after “makes or furnishes” in introductory provisions.
1984—Subsec. (a). Pub. L. 98–369 substituted “20 percent” for “10 percent”.
Effective Date of 2004 Amendment
Pub. L. 108–357, title VIII, § 818(b), Oct. 22, 2004, 118 Stat. 1584, provided that: “The amendment made by this section [amending this section] shall apply to activities after the date of the enactment of this Act [Oct. 22, 2004].”
Effective Date of 1989 Amendment
Pub. L. 101–239, title VII, § 7734(b), Dec. 19, 1989, 103 Stat. 2403, provided that: “The amendment made by subsection (a) [amending this section] shall apply to activities after December 31, 1989.”
Effective Date of 1984 Amendment
Pub. L. 98–369, div. A, title I, § 143(c), July 18, 1984, 98 Stat. 682, provided that: “The amendments made by this section [amending this section and section 7408 of this title] shall take effect on the day after the date of the enactment of this Act [July 18, 1984].”
Effective Date
Pub. L. 97–248, title III, § 320(c), Sept. 3, 1982, 96 Stat. 612, provided that: “The amendments made by this section [enacting this section] shall take effect on the day after the date of the enactment of this Act [Sept. 3, 1982].”