198 
tax return preparer’’ and inserting ‘‘tax return 
preparer’’. 
(G)(i) Section 6695 is amended— 
(I) by striking ‘‘INCOME’’ in the 
heading, and 
(II) by striking ‘‘an income tax return 
preparer’’ each place it appears and insert-
ing ‘‘a tax return preparer’’. 
(ii) Section 6695(f) is amended— 
(I) by striking ‘‘subtitle A’’ and in-
serting ‘‘this title’’, and 
(II) by striking ‘‘the income tax re-
turn preparer’’ and inserting ‘‘the tax re-
turn preparer’’. 
(iii) The item relating to section 6695 in 
the table of sections for part I of subchapter B 
of chapter 68 is amended by striking ‘‘income’’. 
(H) Section 6696(e) is amended by strik-
ing ‘‘subtitle A’’ each place it appears and in-
serting ‘‘this title’’. 
(I)(i) Section 7407 is amended— 
(I) by striking ‘‘INCOME
TAX
RE-
TURN PREPARERS’’ in the heading and 
inserting ‘‘TAX RETURN PREPARERS’’,
199 
(II) by striking ‘‘an income tax return 
preparer’’ each place it appears and insert-
ing ‘‘a tax return preparer’’, 
(III) by striking ‘‘income tax pre-
parer’’ both places it appears in subsection 
(a) and inserting ‘‘tax return preparer’’, 
and 
(IV) by striking ‘‘income tax return’’ 
in subsection (a) and inserting ‘‘tax re-
turn’’. 
(ii) The item relating to section 7407 in 
the table of sections for subchapter A of chap-
ter 76 is amended by striking ‘‘income tax re-
turn preparers’’ and inserting ‘‘tax return pre-
parers’’. 
(J)(i) Section 7427 is amended— 
(I) by striking ‘‘INCOME
TAX
RE-
TURN PREPARERS’’ in the heading and 
inserting ‘‘TAX
RETURN
PREPARERS’’, 
and 
(II) by striking ‘‘an income tax return 
preparer’’ and inserting ‘‘a tax return pre-
parer’’.
200 
(ii) The item relating to section 7427 in 
the table of sections for subchapter B of chap-
ter 76 is amended to read as follows: 
‘‘Sec. 7427. Tax return preparers.’’. 
(b) MODIFICATION OF PENALTY FOR UNDERSTATE-
MENT OF TAXPAYER’S LIABILITY BY TAX RETURN PRE-
PARER.—Subsections (a) and (b) of section 6694 are 
amended to read as follows: 
‘‘(a) UNDERSTATEMENT DUE
TO UNREASONABLE 
POSITIONS.— 
‘‘(1) IN
GENERAL.—Any tax return preparer 
who prepares any return or claim for refund with re-
spect to which any part of an understatement of li-
ability is due to a position described in paragraph 
(2) shall pay a penalty with respect to each such re-
turn or claim in an amount equal to the greater of— 
‘‘(A) $1,000, or 
‘‘(B) 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 position is 
described in this paragraph if— 
‘‘(A) the tax return preparer knew (or rea-
sonably should have known) of the position,
201 
‘‘(B) there was not a reasonable belief that 
the position would more likely than not be sus-
tained on its merits, and 
‘‘(C)(i) the position was not disclosed as 
provided in section 6662(d)(2)(B)(ii), or 
‘‘(ii) there was no reasonable basis for the 
position. 
‘‘(3) REASONABLE
CAUSE
EXCEPTION.—No 
penalty shall be imposed under this subsection if it 
is shown that there is reasonable cause for the un-
derstatement and the tax return preparer acted in 
good faith. 
‘‘(b) UNDERSTATEMENT
DUE
TO
WILLFUL
OR 
RECKLESS CONDUCT.— 
‘‘(1) IN
GENERAL.—Any tax return preparer 
who prepares any return or claim for refund with re-
spect to which any part of an understatement of li-
ability is due to a conduct described in paragraph 
(2) shall pay a penalty with respect to each such re-
turn or claim in an amount equal to the greater of— 
‘‘(A) $5,000, or 
‘‘(B) 50 percent of the income derived (or 
to be derived) by the tax return preparer with 
respect to the return or claim.
202 
‘‘(2) WILLFUL OR RECKLESS CONDUCT.—Con-
duct described in this paragraph is conduct by the 
tax return preparer which is— 
‘‘(A) a willful attempt in any manner to 
understate the liability for tax on the return or 
claim, or 
‘‘(B) a reckless or intentional disregard of 
rules or regulations. 
‘‘(3) REDUCTION IN PENALTY.—The amount of 
any penalty payable by any person by reason of this 
subsection for any return or claim for refund shall 
be reduced by the amount of the penalty paid by 
such person by reason of subsection (a).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to returns prepared after the date 
of the enactment of this division. 
SEC. 7247. PENALTY FOR FILING ERRONEOUS REFUND 
CLAIMS. 
(a) IN GENERAL.—Part I of subchapter B of chapter 
68 (relating to assessable penalties) is amended by insert-
ing after section 6675 the following new section: 
‘‘SEC. 6676. ERRONEOUS CLAIM FOR REFUND OR CREDIT. 
‘‘(a) CIVIL PENALTY.—If a claim for refund or credit 
with respect to income tax (other than a claim for a refund 
or credit relating to the earned income credit under section
203 
32) is made for an excessive amount, unless it is shown 
that the claim for such excessive amount has a reasonable 
basis, the person making such claim shall be liable for a 
penalty in an amount equal to 20 percent of the excessive 
amount. 
‘‘(b) EXCESSIVE AMOUNT.—For purposes of this sec-
tion, the term ‘excessive amount’ means in the case of any 
person the amount by which the amount of the claim for 
refund or credit for any taxable year exceeds the amount 
of such claim allowable under this title for such taxable 
year. 
‘‘(c) COORDINATION WITH OTHER PENALTIES.— 
This section shall not apply to any portion of the excessive 
amount of a claim for refund or credit which is subject 
to a penalty imposed under part II of subchapter A of 
chapter 68.’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions for part I of subchapter B of chapter 68 is amended 
by inserting after the item relating to section 6675 the 
following new item: 
‘‘Sec. 6676. Erroneous claim for refund or credit.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to any claim filed or submitted 
after the date of the enactment of this division.