Iowa AG Seeks Higher Reporting Threshold in Penalty Deduction Regs

Mr. David J. Kautter
Assistant Secretary for Tax Policy
Department of the Treasury
1500 Pennsylvania Avenue NW
Washington, DC 20220

Mr. Michael J. Desmond
Chief Counsel
Internal Revenue Service
1111 Constitution Avenue NW
Washington, DC 20224

RE: Comments on IRS REG-104591-18: Denial of Deduction for Certain Fines, Penalties, and Other Amounts; Information with Respect to Certain Fines, Penalties and Other Amounts

Dear Mr. Kautter and Mr. Desmond:

The Iowa Department of Justice, Office of the Attorney General (Iowa DOJ) submits the below comment on the proposed REG-104591-18 providing guidance on § 6050X which details the proposed reporting requirements for payments under § 162(f) of the Internal Revenue Code (“Code”).

As amended, § 162(f) does not allow for the tax deductions of money paid to a government entity for the violation of any law. Iowa state agencies are regularly involved in settlements and judgements that fall into the wide scope of § 162(f). Due to the high number of instances where a 1098-F form will be required, the reporting threshold detailed in § 6050X is of high concern.

Iowa DOJ is in favor of increasing the reporting threshold beyond the proposed increase of $50,000. While this increase would ease the administrative burden, the number of reports required would remain too onerous on current state and local resources. § 6050X(a)(2)(B) empowers the Secretary of the Treasury to adjust the reporting threshold to efficiently administer the internal revenue laws. A threshold of $500,000 would eliminate minor instances of reporting and allow state and local administrators to focus on the most impactful applications of § 162(f).

The Iowa DOJ appreciates the opportunity to provide its view to the IRS as they develop the final regulations.

TOM MILLER
Attorney General of Iowa
Iowa Department of Justice
Des Moines, IA