(

a) A penalty shall be imposed for understatement of any taxpayer’s liability by a tax return preparer and shall be determined in accordance with

Section of the Internal Revenue Code, relating to understatement of taxpayer’s liability by tax return preparer, except as otherwise provided. (b)

(1) Except as provided in paragraph (2),

Section 6694(a)(1) of the Internal Revenue Code is modified to substitute “$250” for “$1,000.”

(2) For taxpayers that have a reportable transaction, as defined in

Section 6707A(c)(1) of the Internal Revenue Code, with respect to which the requirements of

Section 6664(d)(2)(

A) of the Internal Revenue Code are not met, any listed transaction, as defined in

Section 6707A(c)(2) of the Internal Revenue Code, or a gross misstatement within the meaning of

Section 6404(g)(2)(

D) of the Internal Revenue Code, paragraph (1) shall not apply. (

c) Section 6694(

c) of the Internal Revenue Code shall not apply and, in lieu thereof, the following shall apply:

(1) If, within days after the day on which notice and demand of any penalty under

Section 6694(

a) or 6694(

b) of the Internal Revenue Code is made against any person who is an income tax return preparer, that person pays an amount which is not less than percent of the amount of that penalty and files a claim for refund of the amount so paid, no levy or proceeding in court for the collection of the remainder of that penalty shall be made, begun, or prosecuted until the final resolution of a proceeding begun as provided in paragraph (2). Notwithstanding

Section 19381, the beginning of that proceeding or levy during the time that prohibition is in force may be enjoined in a proceeding in the superior court. Nothing in this paragraph shall be construed to prohibit any counterclaim for the remainder of that penalty in a proceeding begun as provided in paragraph (2).

(2) If, within days after the day on which a claim for refund of any partial payment of any penalty under

Section 6694(

a) or 6694(

b) of the Internal Revenue Code is denied (or, if earlier, within days after the expiration of six months after the day on which the claim for refund has been filed), the income tax return preparer fails to begin a proceeding in the superior court for the determination of his or her liability for that penalty, paragraph (1) shall cease to apply with respect to that penalty, effective on the day following the close of the applicable 30-day period referred to in this paragraph.

(3) The running of the period of limitations provided in

Section on the collection by levy or by a proceeding in court in respect of any penalty described in paragraph (1) shall be suspended for the period during which the Franchise Tax Board is prohibited from collecting by levy or a proceeding in court. (

d) The amendments made to this

section by the act adding this subdivision shall apply to returns prepared after the effective date of the act adding this subdivision.