MODIFICATIONS OF ACCURACY-RELATED PENALTY.

SEC. 13236. MODIFICATIONS OF ACCURACY-RELATED PENALTY. (a) Threshold Requirement.— Clause (ii) of section 6662(e)(1)(B) (relating to substantial valuation misstatement under chapter 1) is amended to read as follows: “(ii) the net section 482 transfer price adjustment for the taxable year exceeds the lesser of $5,000,000 or 10 percent of the taxpayer’s gross receipts.” (b) Certain Adjustments Excluded in Determining Threshold.— Subparagraph (B) of section 6662(e)(3) is amended to read as follows: “(B) Certain adjustments excluded in determining threshold.— For purposes of determining whether the threshold requirements of paragraph (1)(B)(ii) are met, the following shall be excluded: “(i) Any portion of the net increase in taxable income referred to in subparagraph (A) which is attributable to any redetennination of a price if— “(I) it is established that the taxpayer determined such price in accordance with a specific pricing method set forth in the regulations prescribed under section 482 and that the taxpayer’s use of such method was reasonable, “(II) the taxpayer has documentation (which was in existence as of the time of filing the return) which sets forth the determination of such price in accordance with such a method and which establishes that the use of such method was reasonable, and “(III) the taxpayer provides such documentation to the Secretary within 30 days of a request for such documentation. “(ii) Any portion of the net increase in taxable income referred to in subparagraph (A) which is attributable to a redetennination of price where such price was not determined in accordance with such a specific pricing method if— “(I) the taxpayer establishes that none of such pricing methods was likely to result in a price that would clearly reflect income, the taxpayer used another pricing method to determine such price, and such other pricing method was likely to result in a price that would clearly reflect income, “(II) the taxpayer has documentation (which was in existence as of the time of filing the return) which sets forth the determination of such price in accordance with such other method and which 107 STAT. 506establishes that the requirements of subclause (I) were satisfied, and “(III) the taxpayer provides such documentation to the Secretary within 30 days of request for such documentation. “(iii) Any portion of such net increase which is attributable to any transaction solely between foreign corporations unless, in the case of any such corporations, the treatment of such transaction affects the determination of income from sources within the United States or taxable income effectively connected with the conduct of a trade or business within the United States.” (c) Coordination With Reasonable Cause Exception.— Paragraph (3) of section 6662(e) is amended by adding at the end thereof the following new subparagraph: “(D) Coordination with reasonable cause exception.— For purposes of section 6664(c) the taxpayer shall not be treated as having reasonable cause for any portion of an underpayment attributable to a net section 482 transfer price adjustment unless such taxpayer meets the requirements of clause (i), (ii), or (iii) of subparagraph (B) with respect to such portion.” (d) Conforming Amendment.— Clause (iii) of section 6662(h)(2)(A) is amended to read as follows: “(iii) in paragraph (1)(B)(ii)— “(I) ‘$20,000,000’ for ‘$5,000,000’, and “(II) ‘20 percent’ for ‘10 percent’.” (e) Effective Date.— The amendments made by this section shall apply to taxable years beginning after December 31, 1993.