Transitional Guidance Under Sections 162(f) and 6050X with Respect To Certain Fines, Penalties, and Other Amounts
Revision of a currently approved collection
No
Regular
10/23/2020
Requested
Previously Approved
36 Months From Approved
01/31/2023
90,100
47,200
48,384
5,664
0
0
The collection covers the new information reporting requirements under IRC 162(f) and new 6050X, which was added by the Tax Cuts and Jobs Act (TCJA).
Generally, no deduction is allowed for any amount paid to, or at the direction of, a government or specified nongovernmental entity for the violation of any law. The general rule does not apply to the following exceptions:
• Amounts that constitute restitution (including remediation of property);
• Amounts paid to come into compliance with the law;
• Amounts paid or incurred as the result of certain court orders in which no government or specified nongovernmental agency is a party; and
• Amounts paid or incurred for taxes due.
To be deductible under an exception, the Taxpayer must establish that an amount required to be paid is for restitution, remediation or to come into compliance with the law, AND the amount must be specifically identified in the settlement agreement or court order as restitution, remediation or to come into compliance with the law.
Any amount paid or incurred as reimbursement to the Government for the costs of any investigation or litigation are not deductible under one of the exceptions (under prior law, these amounts were often considered compensatory and deductible).
The 2017 Tax Cuts and Jobs Act also enacted IRC section 6050X, which requires government agencies or specified nongovernmental regulatory entities to file an information return which identifies:
1. The amount required to be paid as a result of the suit or agreement to which IRC section 162(f)(1) applies;
2. Any amount required to be paid as a result of the suit or agreement that constitutes restitution or remediation of property; and
3. Any amount required to be paid as a result of the suit or agreement for the purpose of coming into compliance with any law that was violated or involved in the investigation or inquiry.
This reporting requirement will not be required with respect to amounts paid or incurred under a binding court order or agreement entered into before the date provided in the future proposed regulations, which will be no earlier than January 1, 2019.
Notice 2018-23 provides information for section 6050X and transitional guidance under IRC § 162(f).
The Treasury Department and the IRS issued proposed regulations (1545-BO67), amending and adding sections to the Income Tax Regulations with respect to sections 162(f) and 6050X. The estimate of 90,100 is based on the estimated number of governments, governmental entities, and non-governmental entities that are treated as governmental entities under the reporting requirements set forth in the proposed regulations.
Updated filing figures indicate an increase in the estimated annual responses by 41,716. This increase will result in a total estimated annual burden increase of 42,720 hours. This submission is being made to revise and extend the current approval as required in the Paperwork Reduction Act.
$75,866
No
Yes
Yes
No
No
No
No
Christopher Wrobel 202 317-4612 christopher.wrobel@irscounsel.treas.gov
No
On behalf of this Federal agency, I certify that the collection of information encompassed by this request complies with 5 CFR 1320.9 and the related provisions of 5 CFR 1320.8(b)(3).
The following is a summary of the topics, regarding the proposed collection of information, that the certification covers:
(i) Why the information is being collected;
(ii) Use of information;
(iii) Burden estimate;
(iv) Nature of response (voluntary, required for a benefit, or mandatory);
(v) Nature and extent of confidentiality; and
(vi) Need to display currently valid OMB control number;
If you are unable to certify compliance with any of these provisions, identify the item by leaving the box unchecked and explain the reason in the Supporting Statement.
2020 Supporting Statement 1545-2284lvd.docx
Section 6050X- Reporting