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section 6653(b)(1)(A) to the portion of the underpayment due to
fraud rather than the entire underpayment (as under former
section 6653(b)(1)) and raise the rate from 50 to 75 percent.
Tax Reform Act of 1986, Pub. L. 99-514, secs. 1503(a), (c), 100
Stat. 2085, 2742-2743; H. Rept. 99-426, 1986-3 C.B. (Vol. 2) 1,
834-835. We must decide whether section 6653(b) as amended in
1986 continues to be remedial, or whether it serves punitive
goals of deterrence or retribution. Department of Revenue v.
Kurth Ranch, supra; United States v. Halper, supra.
We believe that Congress intended section 6653(b) to
continue to be remedial. The report of the Ways and Means
Committee for the Tax Reform Act of 1986 explained the changes to
the fraud addition to tax in 1986 as follows:
Reasons for Change
* * * * * * *
The committee is also concerned that the current
applicability of the fraud penalty to the entire
underpayment of tax (once the IRS has established fraud
with respect to any portion of the underpayment) may
decrease the efficacy of this penalty. The committee
is concerned that imposing the same penalty on two
taxpayers who have identical underpayments, one
attributable wholly to fraud and the other attributable
only in part to fraud, may be an insufficient deterrent
to fraudulent behavior. Consequently, the committee
has narrowed the scope of the fraud penalty so that it
applies only to the portion of the underpayment
attributable to fraud. The committee has concomitantly
increased the level of the penalty. The committee
believes that these modifications more appropriately
target the fraud penalty to fraudulent behavior.
H. Rept. 99-426, 1986-3 C.B. (Vol. 2) 1, 834.
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