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Increased Tax Shelter Penalties for Exempt Organizations

The Tax Increase Prevention and Reconciliation Act of 2005, enacted on May 17, 2006, added section 4965 to the Internal Revenue Code. Section 4965 increases penalties on tax-exempt accommodation parties that are involved in certain prohibited tax shelter transactions. The new law also adopts new disclosure requirements.

IRS guidance addresses the following issues under section 4965:

  • What entities and individuals are subject to excise tax and what taxes and penalties may apply
  • Who is a party subject to the section, and the treatment of proceeds of transactions received before the effective date of the section
  • Disclosure and return requirements
Page Last Reviewed or Updated: 26-Nov-2013