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[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5994 Introduced in House (IH)]

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.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Stop Deducting Damages Act of 
2010''.

SEC. 2. TREATMENT OF PAYMENTS FOR PUNITIVE DAMAGES.

    (a) Disallowance of Deduction for Punitive Damages.--
            (1) In general.--Section 162(g) of the Internal Revenue 
        Code of 1986 (relating to treble damage payments under the 
        antitrust laws) 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. This paragraph shall not apply to punitive damages 
        described in section 104(c).''.
            (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 
        such Code (relating to items specifically included in gross 
        income) 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 
        (relating to information at source) 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 after December 31, 2011.
                                 <all>
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