S. 2115

A bill to amend the Internal Revenue Code of 1986 to disallow any deduction for punitive damages, and for other purposes.

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Contents

II

115th CONGRESS

1st Session

S. 2115

IN THE SENATE OF THE UNITED STATES

November 9, 2017

Mr. Leahy (for himself, Mr. Blumenthal, Mr. Reed, Mrs. Gillibrand, and Ms. Hassan) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to disallow any deduction for punitive damages, and for other purposes.

1.

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 amount paid or incurred for punitive damages in connection with any judgment in, or settlement of, any action between private parties.

.

(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:

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.