H. R. 6700
IN THE HOUSE OF REPRESENTATIVES
December 20, 2012
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
To amend the Internal Revenue Code of 1986 to disallow deductions for the payment of punitive damages, and for other purposes.
This Act may be cited as the
Stop Deducting Damages Act of
Treatment of payments for punitive damages
Disallowance of deduction for punitive damages
Section 162(g) of the Internal Revenue Code of 1986 is amended—
by redesignating paragraphs (1) and (2) as subparagraphs (A) and (B), respectively,
by adding at the end the following new paragraph:
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).
The heading for section 162(g) of such Code
is amended by inserting
and Punitive Damages after
Inclusion in Income of Punitive Damages Paid by Insurer or Otherwise
Part II of subchapter B of chapter 1 of such Code is amended by adding at the end the following new section:
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.
Section 6041 of such Code is amended by redesignating subsection (j) as subsection (k) and by inserting after subsection (i) the following new subsection:
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.
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.
The amendments made by this section shall apply to damages paid or incurred after December 31, 2012.