Title: Government Settlement Transparency and Reform Act
Policy area: Taxation

Summary:
Government Settlement Transparency and Reform Act
This bill amends the Internal Revenue Code to expand provisions relating to the nondeductibility of fines and penalties to prohibit a tax deduction for any amount paid or incurred to, or at the direction of, any governmental entity relating to the violation of any law or the investigation or inquiry into a potential violation of law.
The bill exempts from such prohibition: (1) restitution or amounts paid to come into compliance with any law that was violated or otherwise involved in the investigation or inquiry, (2) amounts paid pursuant to a court order in a suit in which the governmental entity was not a party, and (3) amounts paid or incurred as taxes due.
The bill also imposes new reporting requirements on governmental entities relating to amounts paid as fines or for restitution.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 803 Introduced in Senate (IS)]

<DOC>






115th CONGRESS
  1st Session
                                 S. 803

 To amend the Internal Revenue Code of 1986 to deny tax deductions for 
                    corporate regulatory violations.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 3, 2017

Mr. Reed (for himself and Mr. Grassley) 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 deny tax deductions for 
                    corporate regulatory violations.

    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 ``Government Settlement Transparency 
and Reform Act''.

SEC. 2. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES, AND OTHER 
              AMOUNTS.

    (a) In General.--Subsection (f) of section 162 of the Internal 
Revenue Code of 1986 is amended to read as follows:
    ``(f) Fines, Penalties, and Other Amounts.--
            ``(1) In general.--Except as provided in the following 
        paragraphs of this subsection, no deduction otherwise allowable 
        shall be allowed under this chapter for any amount paid or 
        incurred (whether by suit, agreement, or otherwise) to, or at 
        the direction of, a government or governmental entity in 
        relation to the violation of any law or the investigation or 
        inquiry by such government or entity into the potential 
        violation of any law.
            ``(2) Exception for amounts constituting restitution or 
        paid to come into compliance with law.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any amount that--
                            ``(i) the taxpayer establishes--
                                    ``(I) constitutes restitution 
                                (including remediation of property) for 
                                damage or harm which was or may be 
                                caused by the violation of any law or 
                                the potential violation of any law, or
                                    ``(II) is paid to come into 
                                compliance with any law which was 
                                violated or otherwise involved in the 
                                investigation or inquiry described in 
                                paragraph (1),
                            ``(ii) is identified as restitution or as 
                        an amount paid to come into compliance with 
                        such law, as the case may be, in the court 
                        order or settlement agreement, and
                            ``(iii) in the case of any amount of 
                        restitution for failure to pay any tax imposed 
                        under this title in the same manner as if such 
                        amount were such tax, would have been allowed 
                        as a deduction under this chapter if it had 
                        been timely paid.
                The identification under clause (ii) alone shall not be 
                sufficient to make the establishment required under 
                clause (i).
                    ``(B) Limitation.--Subparagraph (A) shall not apply 
                to any amount paid or incurred as reimbursement to the 
                government or entity for the costs of any investigation 
                or litigation.
            ``(3) Exception for amounts paid or incurred as the result 
        of certain court orders.--Paragraph (1) shall not apply to any 
        amount paid or incurred by reason of any order of a court in a 
        suit in which no government or governmental entity is a party.
            ``(4) Exception for taxes due.--Paragraph (1) shall not 
        apply to any amount paid or incurred as taxes due.
            ``(5) Treatment of certain nongovernmental regulatory 
        entities.--For purposes of this subsection, the following 
        nongovernmental entities shall be treated as governmental 
        entities:
                    ``(A) Any nongovernmental entity which exercises 
                self-regulatory powers (including imposing sanctions) 
                in connection with a qualified board or exchange (as 
                defined in section 1256(g)(7)).
                    ``(B) To the extent provided in regulations, any 
                nongovernmental entity which exercises self-regulatory 
                powers (including imposing sanctions) as part of 
                performing an essential governmental function.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to amounts paid or incurred on or after the date of the enactment of 
this Act, except that such amendments shall not apply to amounts paid 
or incurred under any binding order or agreement entered into before 
such date. Such exception shall not apply to an order or agreement 
requiring court approval unless the approval was obtained before such 
date.

SEC. 3. REPORTING OF DEDUCTIBLE AMOUNTS.

    (a) In General.--Subpart B of part III of subchapter A of chapter 
61 of the Internal Revenue Code of 1986 is amended by inserting after 
section 6050W the following new section:

``SEC. 6050X. INFORMATION WITH RESPECT TO CERTAIN FINES, PENALTIES, AND 
              OTHER AMOUNTS.

    ``(a) Requirement of Reporting.--
            ``(1) In general.--The appropriate official of any 
        government or any entity described in section 162(f)(5) which 
        is involved in a suit or agreement described in paragraph (2) 
        shall make a return in such form as determined by the Secretary 
        setting forth--
                    ``(A) the amount required to be paid as a result of 
                the suit or agreement to which paragraph (1) of section 
                162(f) applies,
                    ``(B) any amount required to be paid as a result of 
                the suit or agreement which constitutes restitution or 
                remediation of property, and
                    ``(C) any amount required to be paid as a result of 
                the suit or agreement for the purpose of coming into 
                compliance with any law which was violated or involved 
                in the investigation or inquiry.
            ``(2) Suit or agreement described.--
                    ``(A) In general.--A suit or agreement is described 
                in this paragraph if--
                            ``(i) it is--
                                    ``(I) a suit with respect to a 
                                violation of any law over which the 
                                government or entity has authority and 
                                with respect to which there has been a 
                                court order, or
                                    ``(II) an agreement which is 
                                entered into with respect to a 
                                violation of any law over which the 
                                government or entity has authority, or 
                                with respect to an investigation or 
                                inquiry by the government or entity 
                                into the potential violation of any law 
                                over which such government or entity 
                                has authority, and
                            ``(ii) the aggregate amount involved in all 
                        court orders and agreements with respect to the 
                        violation, investigation, or inquiry is $600 or 
                        more.
                    ``(B) Adjustment of reporting threshold.--The 
                Secretary may adjust the $600 amount in subparagraph 
                (A)(ii) as necessary in order to ensure the efficient 
                administration of the internal revenue laws.
            ``(3) Time of filing.--The return required under this 
        subsection shall be filed at the time the agreement is entered 
        into, as determined by the Secretary.
    ``(b) Statements To Be Furnished to Individuals Involved in the 
Settlement.--Every person required to make a return under subsection 
(a) shall furnish to each person who is a party to the suit or 
agreement a written statement showing--
            ``(1) the name of the government or entity, and
            ``(2) the information supplied to the Secretary under 
        subsection (a)(1).
The written statement required under the preceding sentence shall be 
furnished to the person at the same time the government or entity 
provides the Secretary with the information required under subsection 
(a).
    ``(c) Appropriate Official Defined.--For purposes of this section, 
the term `appropriate official' means the officer or employee having 
control of the suit, investigation, or inquiry or the person 
appropriately designated for purposes of this section.''.
    (b) Conforming Amendment.--The table of sections for subpart B of 
part III of subchapter A of chapter 61 of the Internal Revenue Code of 
1986 is amended by inserting after the item relating to section 6050W 
the following new item:

``Sec. 6050X. Information with respect to certain fines, penalties, and 
                            other amounts.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred on or after the date of the enactment 
of this Act, except that such amendments shall not apply to amounts 
paid or incurred under any binding order or agreement entered into 
before such date. Such exception shall not apply to an order or 
agreement requiring court approval unless the approval was obtained 
before such date.
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