Dianne Phillips is a Partner in Holland &
Knight's
Boston office
As described in a blog post on March 13, 2018, Section 13306 Tax Cuts and
Jobs Act, P.L. 115-97 (Dec. 22, 2017) revises the longstanding rule
on the deductibility as a business expense (or lack thereof) of
"any fine or similar penalty paid to a government for the
violation of any law." Previously, it was well understood that
such costs could not be deducted as business expenses under 26
U.S.C. § 162(f) and many EPA settlement documents specifically
included such a prohibition, including characterizing certain
payments as falling within the prohibition.
However, this blanket rule was changed by Section 13306 of P.L.
115-97, which amended 26 U.S.C. § 162(f) to provide two
exceptions "for amounts constituting restitution or paid to
come into compliance with law." "Restitution"
includes remediation of property for damage or harm which was or
may be caused by the violation of any law or the
