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II
116TH CONGRESS
1ST SESSION
S. 1185
To amend the Internal Revenue Code of 1986 to disallow any deduction
for punitive damages, and for other purposes.
IN THE SENATE OF THE UNITED STATES
APRIL 11, 2019
Mr. LEAHY 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.
Be it enacted by the Senate and House of Representa-
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tives of the United States of America in Congress assembled,
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SECTION 1. SHORT TITLE.
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This Act may be cited as the ‘‘No Tax Write-offs for
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Corporate Wrongdoers Act’’.
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SEC. 2. DISALLOWANCE OF DEDUCTION FOR PUNITIVE
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DAMAGES.
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(a) DISALLOWANCE OF DEDUCTION.—
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(1) IN GENERAL.—Section 162(g) of the Inter-
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nal Revenue Code of 1986 is amended—
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•S 1185 IS
(A) by redesignating paragraphs (1) and
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(2) as subparagraphs (A) and (B), respectively;
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(B) by striking ‘‘If’’ and inserting:
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‘‘(1) TREBLE DAMAGES.—If’’; and
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(C) by adding at the end the following new
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paragraph:
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‘‘(2) PUNITIVE DAMAGES.—No deduction shall
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be allowed under this chapter for any amount paid
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or incurred for punitive damages in connection with
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any judgment in, or settlement of, any action.’’.
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(2) CONFORMING AMENDMENT.—The heading
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for section 162(g) of such Code is amended by in-
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serting ‘‘OR PUNITIVE DAMAGES’’ after ‘‘LAWS’’.
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(b) INCLUSION IN INCOME OF PUNITIVE DAMAGES
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PAID BY INSURER OR OTHERWISE.—
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(1) IN GENERAL.—Part II of subchapter B of
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chapter 1 of the Internal Revenue Code of 1986 is
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amended by adding at the end the following new sec-
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tion:
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‘‘SEC. 92. PUNITIVE DAMAGES COMPENSATED BY INSUR-
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ANCE OR OTHERWISE.
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‘‘Gross income shall include any amount paid to or
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on behalf of a taxpayer as insurance or otherwise by rea-
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son of the taxpayer’s liability (or agreement) to pay puni-
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tive damages.’’.
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•S 1185 IS
(2) REPORTING REQUIREMENTS.—Section 6041
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of such Code is amended by adding at the end the
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following new subsection:
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‘‘(h) SECTION TO APPLY TO PUNITIVE DAMAGES
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COMPENSATION.—This section shall apply to payments by
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a person to or on behalf of another person as insurance
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or otherwise by reason of the other person’s liability (or
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agreement) to pay punitive damages.’’.
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(3) CONFORMING AMENDMENT.—The table of
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sections for part II of subchapter B of chapter 1 of
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such Code is amended by adding at the end the fol-
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lowing new item:
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‘‘Sec. 92. Punitive damages compensated by insurance or otherwise.’’.
(c) EFFECTIVE DATE.—The amendments made by
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this section shall apply to damages paid or incurred on
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or after the date of the enactment of this Act.
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