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Abusive Shelters

Penalties and Interest

The following is a summary of the applicable abusive tax avoidance transactions penalties:

Penalty
Listed Transactions
Other Reportable Transactions
Participant Penalties:
Failure to disclose participation in a reportable transaction penalty
$30,000 for each undisclosed listed transaction. The total penalty shall not exceed 10% of the increase in net income or reduction in loss that would result if the taxpayer had not participated in the transaction. $15,000 for each undisclosed reportable transaction. The total penalty shall not exceed 10% of the increase in net income or reduction in loss that would result if the taxpayer had not participated in the transaction.
Reportable transaction understatement penalty
20% of deficiency or 30% if the transaction was not disclosed 20% of deficiency or 30% if the transaction was not disclosed
100 percent interest penalty (only applies to potentially abusive transactions entered into before 10/22/04 or listed transactions entered into between 2/28/00 – 12/31/04)
100% of interest assessed on the tax avoidance transaction deficiency from the payment due date through the date that a notice of deficiency is issued. 100% of interest assessed on the tax avoidance transaction deficiency from the payment due date through the date that a notice of deficiency is issued.
Material Advisor Penalties:
Failure to register tax shelter penalty
$100,000 for each unregistered listed transaction $15,000 for each unregistered reportable transaction
Failure to maintain a list of investors penalty
$100,000 for each failure if it involves a listed transaction $15,000 for each failure
Promoting tax shelters penalty
The greater of $10,000 or 50% of the gross income received (or to be received) from anyone required to file an Illinois return and to whom you furnished a false statement. The greater of $10,000 or 50% of the gross income received (or to be received) from anyone required to file an Illinois return and to whom you furnished a false statement.

If you are found to have participated in an abusive tax shelter transaction and did not report and pay any liability associated with that transaction before you were contacted by the IRS or us, interest on that liability will be assessed at 150 percent of the rate in effect at that time.
For detailed information about penalties and interest, please see Publication 103, Penalties and Interest for Illinois Taxes.