S.Amdt. 3240

SA 3240. Mr. LEAHY submitted an amendment intended to be proposed to
amendment SA 2953 proposed by Ms. Murkowski to the bill S. 2012, to
provide for the modernization of the energy policy of the United
States, and for other purposes; which was ordered to lie on the table;
as follows:

At the appropriate place, insert the following:

SEC. ____. DISALLOWANCE OF DEDUCTION FOR PUNITIVE DAMAGES.

(a) Disallowance of Deduction.--
(1) In general.--Section 162(g) of the Internal Revenue
Code of 1986 is amended--
(A) by redesignating paragraphs (1) and (2) as
subparagraphs (A) and (B), respectively,
(B) by striking ``If'' and inserting:
``(1) Treble damages.--If'', and
(C) by adding at the end the following new paragraph:
``(2) Punitive damages.--No deduction shall be allowed
under this chapter for any

[[Page S606]]

amount paid or incurred for punitive damages in connection
with any judgment in, or settlement of, any action.''.
(2) Conforming amendment.--The heading for section 162(g)
of such Code is amended by inserting ``or Punitive Damages''
after ``Laws''.
(b) Inclusion in Income of Punitive Damages Paid by Insurer
or Otherwise.--
(1) In general.--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:

``SEC. 91. PUNITIVE DAMAGES COMPENSATED BY INSURANCE OR
OTHERWISE.

``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.''.
(2) Reporting requirements.--Section 6041 of such Code is
amended by adding at the end the following new subsection:
``(h) Section To Apply to Punitive Damages Compensation.--
This section shall apply to payments by a person to or on
behalf of another person as insurance or otherwise by reason
of the other person's liability (or agreement) to pay
punitive damages.''.
(3) Conforming amendment.--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.''.
(c) Effective Date.--The amendments made by this section
shall apply to damages paid or incurred on or after the date
of the enactment of this Act.
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