[§231-36.7]  Promoting abusive tax shelters.  (a)  A person promotes an abusivetax shelter by:

(1)  Organizing or assisting in the organization of,or participating directly or indirectly in the sale of, an interest in:

(A)  A partnership or other entity;

(B)  Any investment plan or arrangement; or

(C)  Any other plan or arrangement; and

(2)  In connection with any activity described underparagraph (1), making, furnishing, or causing another person to make or furnisha statement with respect to:

(A)  Whether any deduction or credit isallowed;

(B)  Whether any income may be excluded; or

(C)  The securing of any other tax benefit byreason of holding an interest in the entity or participating in the plan orarrangement,

which the person knows or has reason to know isfalse or fraudulent or is a gross valuation overstatement as to any materialmatter.

(b)  A person found promoting an abusive taxshelter shall pay, with respect to each activity described in subsection (a), apenalty of $1,000 or, if the person establishes that the abusive tax sheltergenerated less than $1,000 of gross income, then one hundred per cent of thegross income derived or to be derived by the person from the activity.  Forpurposes of this section, any activity described in subsection (a)(1) shall betreated as a separate activity for each entity or arrangement.  Participationin each sale described in subsection (a)(1) shall be treated as a separateactivity for each entity or arrangement.

(c)  At the request of the director oftaxation, a civil action may be brought to enjoin any person described insubsection (a) from engaging in any conduct described in subsection (a).  Anyaction under this section shall be brought in the circuit court of the circuitwhere the person in subsection (a) resides or where the person's principalplace of business is located.  The court may exercise its jurisdiction over theaction separate and apart from any other action brought by the State againstthose persons described in subsection (a).  If the court finds that a persondescribed in subsection (a) has engaged in any conduct subject to penalty undersubsection (b) and that injunctive relief is appropriate to prevent therecurrence of that conduct, the court may enjoin the person accordingly.

(d)  The director may waive all or any part ofthe penalty provided by subsection (b) with respect to any gross valuationoverstatement on a showing that there was a reasonable basis for the valuationand that the valuation was made in good faith.

(e)  For purposes of this section, "grossvaluation overstatement" means any statement of value for any property orservices if:

(1)  The value so stated exceeds two hundred per centof the amount determined to be the correct valuation; and

(2)  The value of the property or services is directlyrelated to the amount of any deduction or credit allowable to any participant.

(f)  The penalty imposed by this section shallbe in addition to any other penalty provided by law.

(g)  This section shall be construed inaccordance with regulations and judicial interpretations given to section 6700of the Internal Revenue Code. [L 2009, c 166, §2]

 

Note

 

  Applicability of 2009 amendment.  L 2009, c 166, §27.