The IRS and Treasury have released proposed regulations under Section 162(f), as amended under the 2017 tax reform act (the Act), and Section 6050X, added by the Act. Section 162(f) generally disallows a deduction for certain payments to the government or another entity for violations of law. Section 6050X requires the government or entity to file an information return.
The Section 162(f) regulations are proposed to apply to tax years beginning on or after the date of publication of final regulations, except for amounts paid or incurred under an order or agreement that became binding before that date. The Section 6050X regulations are proposed to apply to orders and agreements that become binding on or after January 1, 2022.
The proposed regulations under Sections 162(f) and 6050X provide clarity to taxpayers on the application of the new deduction disallowance rules and needed guidance to government entities on their reporting requirements.