TREATMENT OF CREDITS FOR PURPOSES OF CERTAIN PENALTIES.

SEC. 209. TREATMENT OF CREDITS FOR PURPOSES OF CERTAIN PENALTIES. (a) [26 U.S.C. 6664] Application of Underpayment Penalties.—Section 6664(a) is amended by adding at the end the following: “A rule similar to the rule of section 6211(b)(4) shall apply for purposes of this subsection.”. (b) [26 U.S.C. 6676] Penalty for Erroneous Claim of Credit Made Applicable to Earned Income Credit.—Section 6676(a) is amended by striking “(other than a claim for a refund or credit relating to the earned income credit under section 32)”. (c) Reasonable Cause Exception for Erroneous Claim for Refund or Credit.— (1) [26 U.S.C. 6676] In general.—Section 6676(a) is amended by striking “has a reasonable basis” and inserting “is due to reasonable cause”. (2) Noneconomic substance transactions.—Section 6676(c) is amended by striking “having a reasonable basis” and inserting “due to reasonable cause”. (d) Effective Dates.— (1) [26 U.S.C. 6664 note] Underpayment penalties.—The amendment made by subsection (a) shall apply to— (A) returns filed after the date of the enactment of this Act, and (B) returns filed on or before such date if the period specified in section 6501 of the Internal Revenue Code of 1986 for assessment of the taxes with respect to which such return relates has not expired as of such date. (2) [26 U.S.C. 6676 note] Penalty for erroneous claim of credit.—The amendments made by subsections (b) and (c) shall apply to claims filed after the date of the enactment of this Act.