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.
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