MODIFICATIONS TO SUBSTANTIAL UNDERSTATEMENT PENALTY.

SEC. 13251. MODIFICATIONS TO SUBSTANTIAL UNDERSTATEMENT PENALTY. (a) Reasonable Basis Required.— Clause (ii) of section 6662(d)(2)(B) (relating to reduction for understatement due to position of taxpayer or disclosed item) is amended to read as follows: “(ii) any item if— “(I) the relevant facts affecting the item’s tax treatment are adequately disclosed in the return or in a statement attached to the return, and “(II) there is a reasonable basis for the tax treatment of such item by the taxpayer.” (b) Effective Date.— The amendment made by this section shall apply to returns the due dates for which (determined without regard to extensions) are after December 31, 1993.