The Tax Increase Prevention and Reconciliation Act of 2005, enacted on May 17, 2006, added section 4965 to the Internal Revenue Code. Section 4965 increases penalties on tax-exempt accommodation parties that are involved in certain prohibited tax shelter transactions. The new law also adopts new disclosure requirements.

IRS guidance addresses the following issues under section 4965:

• What entities and individuals are subject to excise tax and what taxes and penalties may apply
• Who is a party subject to the section, and the treatment of proceeds of transactions received before the effective date of the section
• Disclosure and return requirements