118 STAT. 1580 PUBLIC LAW 108–357—OCT. 22, 2004 ‘‘(III) has a fee arrangement with respect to the transaction which is contingent on all or part of the intended tax benefits from the transaction being sustained, or ‘‘(IV) as determined under regulations pre scribed by the Secretary, has a disqualifying finan cial interest with respect to the transaction. ‘‘(iii) DISQUALIFIED OPINIONS.—For purposes of clause (i), an opinion is disqualified if the opinion— ‘‘(I) is based on unreasonable factual or legal assumptions (including assumptions as to future events), ‘‘(II) unreasonably relies on representations, statements, findings, or agreements of the tax payer or any other person, ‘‘(III) does not identify and consider all rel evant facts, or ‘‘(IV) fails to meet any other requirement as the Secretary may prescribe.’’. (2) CONFORMING AMENDMENTS.— (A) Paragraph (1) of section 6664(c) is amended by striking ‘‘this part’’ and inserting ‘‘section 6662 or 6663’’. (B) The heading for subsection (c) of section 6664 is amended by inserting ‘‘FOR UNDERPAYMENTS’’ after ‘‘EXCEP TION’’. (d) REDUCTION IN PENALTY FOR SUBSTANTIAL UNDERSTATEMENT OF INCOME TAX NOT TO APPLY TO TAX SHELTERS.—Subparagraph (C) of section 6662(d)(2) (relating to substantial understatement of income tax) is amended to read as follows: ‘‘(C) REDUCTION NOT TO APPLY TO TAX SHELTERS.— ‘‘(i) IN GENERAL.—Subparagraph (B) shall not apply to any item attributable to a tax shelter. ‘‘(ii) TAX SHELTER.—For purposes of clause (i), the term ‘tax shelter’ means— ‘‘(I) a partnership or other entity, ‘‘(II) any investment plan or arrangement, or ‘‘(III) any other plan or arrangement, if a significant purpose of such partnership, entity, plan, or arrangement is the avoidance or evasion of Federal income tax.’’. (e) CLERICAL AMENDMENTS.— (1) The heading for section 6662 is amended to read as follows: ‘‘SEC. 6662. IMPOSITION OF ACCURACY RELATED PENALTY ON UNDER PAYMENTS.’’. (2) The table of sections for part II of subchapter A of chapter 68 is amended by striking the item relating to section 6662 and inserting the following new items: ‘‘Sec. 6662. Imposition of accuracy related penalty on underpayments. ‘‘Sec. 6662A. Imposition of accuracy related penalty on understatements with respect to reportable transactions.’’. (f) EFFECTIVE DATE.—The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act. 26 USC 6662 note.
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