Rich, a tax practitioner, prepares Company A's federal income tax return. Company A's tax liability is understated under the tax law. In which situation would Rich be most likely to be assessed an IRC section 6694 penalty?

1. Company A's nondisclosed tax position had substantial authority. 2. Company A's disclosed tax position does not have a reasonable basis. 3. Company A had reasonable doubt that the company qualified for certain tax credits. 4. Company A had reasonable cause for the understatement, and Rich acted in good faith.