Proposed regulations, denial of deduction for fines, penalties; OIRA review completed
Proposed regulations, OIRA review completed
OMB’s Office of Information and Regulatory Affairs (OIRA) completed its review of proposed regulations from the U.S. Treasury Department concerning the deductibility of certain fines, penalties, and other amounts under section 162(f).
OIRA reported its review of the proposed regulations was completed on March 19, 2020. OIRA has identified and briefly described the regulations, as follows:
- RIN: 1545-BO67: Rules for denial of deduction for certain fines, penalties, and other amounts
Further, OIRA describes these proposed regulations as:
Revising 1.162-21 regarding deductibility of certain fines, penalties, and other amounts under 162(f), as revised by the Tax Cuts and Jobs Act of 2017. Adding 1.6050X regarding information reporting with respect to certain fines, penalties, and other amounts under 6050X, as added by the Tax Cuts and Jobs Act of 2017.
Treasury regulations that are identified as “major” regulations are subject to review by OMB’s OIRA before being issued, pursuant to Executive Order 13771. Now that OIRA review has been completed, Treasury and the IRS can be expected to release these proposed regulations for publication in the Federal Register—the exact date of publication not being known.
Section 162(f) was revised by the 2017 tax law (Pub. L. No. 115-97, the law that is often referred to as the “Tax Cuts and Jobs Act” (TCJA)). In general, fines and penalties paid to a government are nondeductible for federal income tax purposes under section 162(f). The 2017 tax law further denied any otherwise deductible amounts paid or incurred or at the direction of a governmental or specific nongovernmental regulatory entity for the violation (or potential violation) of any law. As had been the case under the tax law prior to enactment of the TCJA, certain exceptions apply to payments established as restitution, remediation of property, or required for correction of noncompliance, as well as amounts paid or incurred as taxes due, but only if so identified in the court order or settlement agreement. Such exceptions do not apply to reimbursement of government investigative or litigation costs.
© 2022 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
For more detail about the structure of the KPMG global organization please visit https://home.kpmg/governance.
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.