I 

111TH CONGRESS 

2D SESSION H. R. 5994 

To amend the Internal Revenue Code of 1986 to disallow deductions for 

the payment of punitive damages, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 30, 2010 

Mr. WELCH (for himself, Mr. CONNOLLY of Virginia, and Ms. LEE of California) introduced the following bill; which was referred to the Committee 

on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to disallow 

deductions for the payment of punitive damages, and 

for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Stop Deducting Dam5 ages Act of 2010’’. 

6 SEC. 2. TREATMENT OF PAYMENTS FOR PUNITIVE DAM7 AGES. 

8 (a) DISALLOWANCE OF DEDUCTION FOR PUNITIVE

9 DAMAGES.— 


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•HR 5994 IH

1 (1) IN GENERAL.—Section 162(g) of the Inter2 nal Revenue Code of 1986 (relating to treble damage 

3 payments under the antitrust laws) is amended— 

4 (A) by redesignating paragraphs (1) and 

5 (2) as subparagraphs (A) and (B), respectively, 

6 (B) by striking ‘‘If’’ and inserting: 

7 ‘‘(1) TREBLE DAMAGES.—If’’, and 

8 (C) by adding at the end the following new 

9 paragraph: 

10 ‘‘(2) PUNITIVE DAMAGES.—No deduction shall 

11 be allowed under this chapter for any amount paid 

12 or incurred for punitive damages in connection with 

13 any judgment in, or settlement of, any action. This 

14 paragraph shall not apply to punitive damages de15 scribed in section 104(c).’’. 

16 (2) CONFORMING AMENDMENT.—The heading 

17 for section 162(g) of such Code is amended by in18 serting ‘‘OR PUNITIVE DAMAGES’’ after ‘‘LAWS’’. 

19 (b) INCLUSION IN INCOME OF PUNITIVE DAMAGES

20 PAID BY INSURER OR OTHERWISE.— 

21 (1) IN GENERAL.—Part II of subchapter B of 

22 chapter 1 of such Code (relating to items specifically 

23 included in gross income) is amended by adding at 

24 the end the following new section: 


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•HR 5994 IH

1 ‘‘SEC. 91. PUNITIVE DAMAGES COMPENSATED BY INSUR2 ANCE OR OTHERWISE. 

3 ‘‘Gross income shall include any amount paid to or 

4 on behalf of a taxpayer as insurance or otherwise by rea5 son of the taxpayer’s liability (or agreement) to pay puni6 tive damages.’’. 

7 (2) REPORTING REQUIREMENTS.—Section 6041 

8 of such Code (relating to information at source) is 

9 amended by adding at the end the following new 

10 subsection: 

11 ‘‘(h) SECTION TO APPLY TO PUNITIVE DAMAGES

12 COMPENSATION.—This section shall apply to payments by 

13 a person to or on behalf of another person as insurance 

14 or otherwise by reason of the other person’s liability (or 

15 agreement) to pay punitive damages.’’. 

16 (3) CONFORMING AMENDMENT.—The table of 

17 sections for part II of subchapter B of chapter 1 of 

18 such Code is amended by adding at the end the fol19 lowing new item: 

‘‘Sec. 91. Punitive damages compensated by insurance or otherwise.’’. 

20 (c) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to damages paid or incurred after 

22 December 31, 2011. 

Æ 


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