Dozens of executives and over 30 corporations have agreed to take advantage of an Internal Revenue Service program offering reduced penalties to those accused of trying to hide income through an abusive tax shelter.

The executives could have their taxable income adjusted upward by $500 million. Another 19 executives who did not participate in the program face audits or criminal tax investigations into whether they underreported income by $400 million.

"The response reflects higher standards for corporate governance and less tolerance for abusive tax shelters," IRS Commissioner Mark Everson said in a statement released Monday. Executives had until May 23 to report their involvement in the shelter and participate in the settlement program, which requires them to pay a 10 percent penalty -- half the 20 percent penalty that could have been applied.

Companies who participated faced no penalties, but they had to disclose the names of all executives who participated in the tax shelter. The IRS contacted the senior management of corporations known to have used the shelter and recommended that the matter be reviewed by the board of directors' audit committee.

In the typical tax shelter, a corporation grants an executive stock options. The executive transfers the options to a family partnership established solely for receiving the options, usually owned by the executive, spouse and children.

The executive takes a 15- to 30-year promissory note as payment for the options. The partnership sells the options and takes the position that taxes aren't due for 15 to 30 years.

Tax laws say that executives owe tax when they exercise stock options.

In announcing the program in February, Everson said the delayed deductions and the role of financial advisers, who recommended the shelters and served as company auditors, raise questions about corporate governance. In some cases, company employees overrode payroll systems to avoid reporting the income on executives' W-2 wage and tax statements.

"These deals were done for the benefit of executives and often at the expense of shareholders and they involved ... many leading publicly traded companies," he said at the time.

All told, 124 executives were targeted by the agency. It determined 10 of them had not participated in the abusive transaction, leaving 114 as targets. Of those, 80 agreed to participate under the terms of the settlement offer.

The agency also identified 46 corporations for investigation. Four were found to have reported the transaction accurately. Of the others, 33 elected to participate in the IRS program. Another four had already passed the statute of limitations for review although their related executives chose to participate in the executive program. Five did not elect to participate.

An additional four companies and seven executives also participated in the program.

Executives who did not participate face paying the 20-percent penalty. Corporations face paying penalties and losing deductions for underreporting income, failing to pay employment and income taxes and issuing incorrect W-2 statements.

The tax shelter was marketed during the late 1990s and early 2000s