115th CONGRESS 1st Session |
To amend the Internal Revenue Code of 1986 to deny tax deductions for corporate regulatory violations.
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
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,
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) 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.