H.R. 6049 - eliminates more likely than not

The Renewable Energy and Job Creation Act of 2008 is expected to be passed by the Senate, and the "more likely than not" standard" will be replaced by the substantial authohrity standard. That is the same standard used to abate the section 6662 negligence penalty. Is that something to cheer about? The term "substantial authority" is still a subjective standard. Has anyone tried to get the 20% negligence penalty abated because they had "substantial authority" to support the position taken? Usually, the better way to handle the 6662 penalty is to argue "reasonable cause" to abate the penalty. It is not an easy task. If the "more likely than not" standard means more than 51% support and the "substantial authority" standard" means more than 41% support, what living IRS person can be trusted to understand that nuance? It is not an objective standard.
The AICPA,ABA, NAEA and other professional organizations should have lobbied to not change the amount of the penalty. That would have been something to cheer about. I believe those organizations blundered by lobbying the wrong issue that they would have won, because there is and was no opposition to these influential organizations in the reduction of the "more likely than not" standard.

Having given you that bleak assessment, H.R. 6040 follows:


Renewable Energy and Job Creation Act of 2008, as Passed by the House on May 21, 2008

May 28, 2008

110th CONGRESS, 2d Session

H. R. 6049

AN ACT

To amend the Internal Revenue Code of 1986 to provide incentives for energy production and conservation, to extend certain expiring provisions, to provide individual income tax relief, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE, ETC.

(a) Short Title- This Act may be cited as the `Renewable Energy and Job Creation Act of 2008'.

TITLE I --ENERGY TAX INCENTIVES

TITLE II --ONE-YEAR EXTENSION OF TEMPORARY PROVISIONS

Subtitle A --Extensions Primarily Affecting Individual

Subtitle B --Business Related Provisions

SEC. 321. MODIFICATION OF PENALTY ON UNDERSTATEMENT OF TAXPAYER'S LIABILITY BY TAX RETURN PREPARER.

(a) In General- Subsection (a) of section 6694 (relating to understatement due to unreasonable positions) is amended to read as follows:

`(a) Understatement Due to Unreasonable Positions-

`(1) IN GENERAL- If a tax return preparer --

`(A) prepares any return or claim of refund with respect to which any part of an understatement of liability is due to a position described in paragraph (2), and

`(B) knew (or reasonably should have known) of the position,

such tax return preparer shall pay a penalty with respect to each such return or claim in an amount equal to the greater of $1,000 or 50 percent of the income derived (or to be derived) by the tax return preparer with respect to the return or claim.

`(2) UNREASONABLE POSITION-

`(A) IN GENERAL- Except as otherwise provided in this paragraph, a position is described in this paragraph unless there is or was substantial authority for the position.
`(B) DISCLOSED POSITIONS- If the position was disclosed as provided in section 6662(d)(2)(B)(ii)(I) and is not a position to which subparagraph (C) applies, the position is described in this paragraph unless there is a reasonable basis for the position.
`(C) TAX SHELTERS AND REPORTABLE TRANSACTIONS- If the position is with respect to a tax shelter (as defined in section 6662(d)(2)(C)(ii)) or a reportable transaction to which section 6662A applies, the position is described in this paragraph unless it is reasonable to believe that the position would more likely than not be sustained on its merits.

`(3) REASONABLE CAUSE EXCEPTION- No penalty shall be imposed under this subsection if it is shown that there is reasonable cause for the understatement and the tax return preparer acted in good faith.'.

(b) Effective Date- The amendment made by this section shall apply --

(1) in the case of a position other than a position described in subparagraph (C) of section 6694(a)(2) of the Internal Revenue Code of 1986 (as amended by this section), to returns prepared after May 25, 2007, and

(2) in the case of a position described in such subparagraph (C), to returns prepared for taxable years ending after the date of the enactment of this Act.