Sec. 301. Denial of deduction for punitive damages
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Section 162(g) of the Internal Revenue Code of 1986 is amended— by redesignating paragraphs
(1)and
(2)as subparagraphs
(A)and (B), respectively, by striking If and inserting: If , and by adding at the end the following new paragraph: No deduction shall be allowed under this chapter for any amount paid or incurred for punitive damages in connection with any judgment in, or settlement of, any action. This paragraph shall not apply to punitive damages described in section 104(c). . The heading for section 162(g) of such Code is amended by inserting after or Punitive Damages . Laws Part II of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section: Gross income shall include any amount paid to or on behalf of a taxpayer as insurance or otherwise by reason of the taxpayer’s liability (or agreement) to pay punitive damages. . Section 6041 of such Code is amended by adding at the end the following new subsection: This section shall apply to payments by a person to or on behalf of any corporation, individual, partnership, or other entity, as insurance or otherwise, by reason of such corporation, individual, partnership, or entity’s liability (or agreement) to pay punitive damages. . The table of sections for part II of subchapter B of chapter 1 of such Code is amended by adding at the end the following new item: Sec. 91. Punitive damages compensated by insurance or otherwise. . The amendments made by this section shall apply to damages paid or incurred on or after the date of the enactment of this Act.