Internal Revenue Code · 26 U.S.C.
§ 4965. Excise tax on certain tax-exempt entities entering into prohibited tax shelter transactions
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 4965
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Added
- May 17, 2006 by Pub. L. 109–222
- Last amended
- December 19, 2014 by Pub. L. 113–295
- Amendments
- 2 dated changes in the source credit
- Length
- 7 subsections · 1,159 words · about 5 min to read
- Defines
- 6 terms
- Cross-references
- cites 10; cited by 3 Code sections and 7 other regulations
- Regulations
- 9 issued under this section
If a transaction is a prohibited tax shelter transaction at the time any tax-exempt entity described in paragraph (1), (2), or (3) of subsection (c) becomes a party to the transaction, such entity shall pay a tax for the taxable year in which the entity becomes such a party and any subsequent taxable year in the amount determined under subsection (b)(1).
If any tax-exempt entity described in paragraph (1), (2), or (3) of subsection (c) is a party to a subsequently listed transaction at any time during a taxable year, such entity shall pay a tax for such taxable year in the amount determined under subsection (b)(1).
If any entity manager of a tax-exempt entity approves such entity as (or otherwise causes such entity to be) a party to a prohibited tax shelter transaction at any time during the taxable year and knows or has reason to know that the transaction is a prohibited tax shelter transaction, such manager shall pay a tax for such taxable year in the amount determined under subsection (b)(2).
The term “listed transaction” has the meaning given such term by section 6707A(c)(2).
The term “prohibited reportable transaction” means any confidential transaction or any transaction with contractual protection (as defined under regulations prescribed by the Secretary) which is a reportable transaction (as defined in section 6707A(c)(1)).
The term “subsequently listed transaction” means any transaction to which a tax-exempt entity is a party and which is determined by the Secretary to be a listed transaction at any time after the entity has become a party to the transaction. Such term shall not include a transaction which is a prohibited reportable transaction at the time the entity became a party to the transaction.
The Secretary is authorized to promulgate regulations which provide guidance regarding the determination of the allocation of net income or proceeds of a tax-exempt entity attributable to a transaction to various periods, including before and after the listing of the transaction or the date which is 90 days after the date of the enactment of this section.
The tax imposed by this section is in addition to any other tax, addition to tax, or penalty imposed under this title.
(Added Pub. L. 109–222, title V, § 516(a)(1), May 17, 2006, 120 Stat. 368; amended Pub. L. 110–172, § 11(a)(30), Dec. 29, 2007, 121 Stat. 2487; Pub. L. 113–295, div. B, title I, § 102(e)(3), Dec. 19, 2014, 128 Stat. 4062.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
Regulations under this section
Treasury regulations (26 CFR) issued under § 4965
- § 53.4965-1 Overview.
- § 53.4965-2 Covered tax-exempt entities.
- § 53.4965-3 Prohibited tax shelter transactions.
- § 53.4965-4 Definition of tax-exempt party to a prohibited tax shelter transaction.
- § 53.4965-5 Entity managers and related definitions.
- § 53.4965-6 Meaning of “knows or has reason to know”.
- § 53.4965-7 Taxes on prohibited tax shelter transactions.
- § 53.4965-8 Definition of net income and proceeds and standard for allocating net income or proceeds to various periods.
- § 53.4965-9 Effective/applicability dates.
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 10 other sections
- § 11 Tax imposed
- § 501(c) Exemption from tax on corporations, certain trusts, etc.
- § 170(c) Charitable, etc., contributions and gifts
- § 7701(a)(40) Definitions
- § 4979(e) Tax on certain excess contributions
- § 529 Qualified tuition programs
- § 457(b) Deferred compensation plans of State and local governments and tax-exempt organizations
- § 4973(a) Tax on excess contributions to certain tax-favored accounts and annuities
- § 529A Qualified ABLE programs
- § 6707A(c)(2) Penalty for failure to include reportable transaction information with return
Cited by 3 Code sections
- § 6011(g) General requirement of return, statement, or list
- § 6033(a)(2) Returns by exempt organizations
- § 6652(c)(3)(A) Failure to file certain information returns, registration statements, etc.
Cited in 7 regulations not issued under it
- § 1.6011-9 Syndicated conservation easement listed transactions.
- § 1.6011-15 Charitable remainder annuity trust listed transaction.
- § 1.6033-5 Disclosure by tax-exempt entities that are parties to certain reportable transactions.
- § 53.6071-1 Time for filing returns.
- § 54.6011-1 General requirement of return, statement, or list.
- § 301.6011(g)-1 Disclosure by taxable party to the tax-exempt entity.
- § 301.6104(c)-1 Disclosure of certain information to State officials.
Amendment history
From the source credit and the official notes, newest first.
Where it sits in the Code
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
References in Text
The date of the enactment of this section, referred to in subsecs. (b)(1)(B) and (f), is the date of enactment of Pub. L. 109–222, which was approved May 17, 2006.
Amendments
2014—Subsec. (c)(8). Pub. L. 113–295 added par. (8).
2007—Subsec. (c)(6). Pub. L. 110–172 substituted “section 457(e)(1)(A)” for “section 4457(e)(1)(A)”.
Statutory Notes and Related Subsidiaries
Effective Date of 2014 Amendment
Amendment by Pub. L. 113–295 applicable to taxable years beginning after Dec. 31, 2014, see section 102(f)(1) of Pub. L. 113–295, set out as a note under section 552a of Title 5, Government Organization and Employees.
Effective Date
Pub. L. 109–222, title V, § 516(d), May 17, 2006, 120 Stat. 372, provided that:
“(1) In general.— Except as provided in paragraph (2), the amendments made by this section [enacting this section and amending sections 6011, 6033, and 6652 of this title] shall apply to taxable years ending after the date of the enactment of this Act [May 17, 2006], with respect to transactions before, on, or after such date, except that no tax under section 4965(a) of the Internal Revenue Code of 1986 (as added by this section) shall apply with respect to income or proceeds that are properly allocable to any period ending on or before the date which is 90 days after such date of enactment.“(2) Disclosure.— The amendments made by subsections (b) and (c) [amending sections 6011, 6033, and 6652 of this title] shall apply to disclosures the due date for which are after the date of the enactment of this Act.”