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 Cali-
fornia) 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 Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Stop Deducting Dam-
ages Act of 2010’’. 
SEC. 2. TREATMENT OF PAYMENTS FOR PUNITIVE DAM-
AGES. 
(a) DISALLOWANCE OF DEDUCTION FOR PUNITIVE 
DAMAGES.— 
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(1) IN GENERAL.—Section 162(g) of the Inter-
nal 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 de-
scribed in section 104(c).’’. 
(2) CONFORMING AMENDMENT.—The heading 
for section 162(g) of such Code is amended by in-
serting ‘‘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: 
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‘‘SEC. 91. PUNITIVE DAMAGES COMPENSATED BY INSUR-
ANCE OR OTHERWISE. 
‘‘Gross income shall include any amount paid to or 
on behalf of a taxpayer as insurance or otherwise by rea-
son of the taxpayer’s liability (or agreement) to pay puni-
tive 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 fol-
lowing 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. 
Æ 
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