Damages Received on Account of Personal Physical Injuries or Physical Sickness, 3106-3108 [2012-1255]
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Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Rules and Regulations
(e) Substantial modification of a
NASA facility’s master plan in a manner
expected to result in significant effect(s)
on the quality of the human
environment.
(f) Substantial construction projects
expected to result in significant effect(s)
on the quality of the human
environment, when such construction
and its effects are not within the scope
of an existing master plan and EIS.
§ 1216.307 Programmatic EAs, and EISs,
and tiering.
NASA encourages the analysis of
actions at the programmatic level for
those programs similar in nature or
broad in scope. Programmatic NEPA
analyses may take place in the form of
an EA or EIS. These documents allow
‘‘tiering’’ of NEPA documentation for
subsequent or specific actions.
§ 1216.308
Supplemental EAs and EISs.
As detailed in CEQ regulations,
supplemental documentation may be
required for previous EAs or EISs (see
40 CFR 1502.9). If changed
circumstances require preparation of a
supplemental EA or EIS, such document
will be prepared following the same
general process as the original EA or
EIS. No new scoping is required for a
supplemental EIS; however, NASA may
choose to conduct scoping.
§ 1216.309
Mitigation and monitoring.
When the analysis proceeds to an EA
or EIS and mitigation measures are
selected to avoid or reduce
environmental impacts, such mitigation
measures will be identified in the EA/
FONSI or the EIS Record of Decision
(ROD). NASA will implement
mitigation measures (including adaptive
management strategies, where
appropriate) consistent with applicable
FONSIs and/or RODs and will monitor
their implementation and effectiveness.
The Responsible Official will ensure
that funding requests for such
mitigation measures are included in the
program or project budget.
mstockstill on DSK4VPTVN1PROD with RULES
§ 1216.310
Classified actions.
(a) Classification does not relieve
NASA of the requirement to assess,
document, and consider the
environmental impacts of a proposed
action.
(b) When classified information can
reasonably be separated from other
information and a meaningful
environmental analysis can be
produced, unclassified documents will
be prepared and processed in
accordance with these regulations.
Classified portions will be kept separate
and provided to properly cleared
reviewers and decision makers in the
VerDate Mar<15>2010
18:17 Jan 20, 2012
Jkt 226001
form of a properly classified document
that meets the requirements of these
regulations to the extent permitted,
given such classification.
PPO Planetary Protection Office
REC Record of Environmental
Consideration
ROD Record of Decision
U.S.C. United States Code
§ 1216.311
Definitions
1. A2 Mission Multiple—The A2 Mission
Multiple is a calculated value based on the
total amount of radioactive material being
launched. This value is used in defining
the level of review and approval required
for launch.
2. Earth Return Mission (also known as a
Sample Return)—A subcategory of
missions that would collect extraterrestrial
materials from solar system bodies and
return them to Earth.
3. NASA Senior Environmental Official—The
Senior NASA Headquarters Official
responsible for providing executive and
functional leadership for environmental
compliance. As of January 1, 2011, the SEO
is the Assistant Administrator for Strategic
Infrastructure.
4. Record of Environmental Consideration—
A brief document that is used to describe
a proposed action, identify the applicable
categorical exclusion, and explain why
further environmental analysis is not
required.
5. Restricted Earth Return—A subcategory of
Earth Return Missions which requires
additional measures to ensure that any
potential indigenous life form would be
contained so that it could not impact
humans or Earth’s environment.
6. Space Flight Projects/Programs—Those
NASA actions that develop products
intended for use in space and/or that
support ground and space operations for
products in space.
7. Unrestricted Earth Return—NASA
Procedural Requirements define this as a
subcategory of Earth Return Missions that
would collect extraterrestrial materials
from solar system bodies (deemed by
scientific opinion to have no indigenous
life forms) and return those samples to
Earth. No planetary protection measures
are required for the inbound (return to
Earth) phase of the mission.
Emergency responses.
(a) When the Responsible Official
determines that an emergency exists
that makes it necessary to take urgently
needed actions before preparing a NEPA
analysis and any required
documentation, in accordance with the
provisions in §§ 1216.305 and 1216.307
of this subpart, then the following
provisions apply:
(1) The Responsible Official may take
urgently needed actions that are
necessary to control the immediate
impacts of the emergency needed to
mitigate harm to life, property, or
resources. When taking such actions,
the Responsible Official shall, to the
extent practical, mitigate foreseeable
adverse environmental impacts.
(2) [Reserved]
(b) At the earliest practicable time, the
Responsible Official shall also notify the
SEO of the emergency situation and the
action(s) taken. The SEO will determine
the appropriate NEPA action associated
with the urgent actions taken as a result
of the emergency. If the urgent actions
will reasonably result in significant
environmental impacts, the SEO will
consult with the CEQ to ensure
compliance with 40 CFR 1506.11 as
soon as is reasonable.
(c) If the Responsible Official
proposes emergency actions which
continue beyond the urgent actions
taken as a result of the emergency, and
these actions are not categorically
excluded, the Responsible Official will
consult with the SEO to determine the
appropriate level of NEPA compliance.
If continuation of the emergency actions
will reasonably result in significant
environmental impacts, the SEO will
consult with the CEQ to ensure
compliance with 40 CFR 1506.11 as
soon as is reasonable.
Appendix A to Subpart 1206.3—
Acronyms and Definitions
CatEx Categorical Exclusion
CEQ Council on Environmental Quality
CFR Code of Federal Regulations
CWA Clean Water Act
CZMA Coastal Zone Management Act
DoI (U.S.) Department of the Interior
EA Environmental Assessment
EMD Environmental Management Division
EIS Environmental Impact Statement
FONSI Finding of No Significant Impact
FR Federal Register
GSA General Services Administration
NEPA National Environmental Policy Act
NHPA National Historic Preservation Act
SEO Senior Environmental Official
OGC Office of the General Counsel
PO 00000
Frm 00038
Fmt 4700
Sfmt 4700
Dated: December 23, 2011.
Charles F. Bolden, Jr.,
Administrator, National Aeronautics and
Space Administration.
[FR Doc. 2012–1272 Filed 1–20–12; 8:45 am]
BILLING CODE P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9573]
RIN 1545–BF81
Damages Received on Account of
Personal Physical Injuries or Physical
Sickness
Internal Revenue Service (IRS),
Treasury.
AGENCY:
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Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Rules and Regulations
ACTION:
Final regulations.
This document contains final
regulations relating to the exclusion
from gross income for amounts received
on account of personal physical injuries
or physical sickness. The final
regulations reflect amendments under
the Small Business Job Protection Act of
1996. The final regulations affect
taxpayers receiving damages on account
of personal physical injuries or physical
sickness and taxpayers paying these
damages.
SUMMARY:
Effective Date: These regulations
are effective on January 23, 2012.
Applicability Date: For date of
applicability, see § 1.104–1(c)(3).
FOR FURTHER INFORMATION CONTACT:
Sheldon Iskow, (202) 622–4920 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
DATES:
Background
This document contains final
regulations that amend the Income Tax
Regulations (26 CFR part 1) to reflect
amendments made to section 104(a)(2)
of the Internal Revenue Code (Code) by
section 1605(a) and (b) of the Small
Business Job Protection Act of 1996,
Public Law 104–188, 110 Stat. 1838 (the
1996 Act). On September 15, 2009, a
notice of proposed rulemaking (REG–
127270–06) was published in the
Federal Register (74 FR 47152). Written
comments responding to the notice of
proposed rulemaking were received.
The comments are available for public
inspection at www.regulations.gov or on
request. A public hearing was requested
and held on February 23, 2010. After
consideration of all the comments, the
proposed regulations are adopted
without substantive change by this
Treasury decision. The comments are
discussed in the preamble.
mstockstill on DSK4VPTVN1PROD with RULES
Summary of Comments
The proposed regulations deleted the
requirement that to qualify for exclusion
from gross income, damages received
from a legal suit, action, or settlement
agreement must be based upon ‘‘tort or
tort type rights.’’ The proposed
regulations provided, instead, that the
section 104(a)(2) exclusion may apply to
damages recovered for a personal
physical injury or physical sickness
under a statute that does not provide for
a broad range of remedies, and that the
injury need not be defined as a tort.
A commentator suggested that
eliminating the tort type rights test
would create confusion about what
constitutes a personal injury. The
commentator suggested that the
regulations should retain the tort type
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18:17 Jan 20, 2012
Jkt 226001
rights test but clarify that meeting the
test does not depend on the nature of
the remedies or the state law
characterization of the cause of action.
The final regulations do not adopt this
comment. Before the 1996 amendment,
the section 104(a)(2) exclusion was not
limited to damages for physical injuries
or sickness. The tort-type rights test was
intended to distinguish damages for
personal injuries from, for example,
damages for breach of contract. Since
that time, however, Commissioner v.
Schleier, 515 U.S. 323 (1995), has
interpreted the statutory ‘‘on account
of’’ test to exclude only damages
directly linked to ‘‘personal’’ injuries or
sickness. Furthermore, under the 1996
Act, only damages for personal physical
injuries or physical sickness are
excludable. These legislative and
judicial developments have eliminated
the need to base the section 104(a)(2)
exclusion on tort cause of action and
remedy concepts.
A commentator requested that the
final regulations address whether a
claimant has constructive receipt or the
current economic benefit of a damage
award that is set aside for the claimant’s
benefit in a trust or fund, such as a
qualified settlement fund described in
§ 1.468B–1. Other commentators asked
that the final regulations define certain
personal injuries as physical injuries
and describe the circumstances in
which emotional distress is attributable
to physical injuries.
The final regulations do not adopt
these comments because they are
beyond the scope of the proposed
regulations, which did not propose rules
on the issues raised by the comments.
However, these comments will be
considered if guidance is published on
these topics in the future.
Effective/Applicability Date
These regulations apply to damages
paid pursuant to a written binding
agreement, court decree, or mediation
award entered into or issued after
September 13, 1995, and received after
January 23, 2012. This September 13,
1995, effective date derives from an
exception set forth in section 1605(d)(2)
of the 1996 Act to the statutory effective
date of the amendments to section
104(a)(2).
In addition, taxpayers may apply
these regulations to amounts paid
pursuant to a written binding
agreement, court decree, or mediation
award entered into or issued after
September 13, 1995, and received after
August 20, 1996, and if otherwise
eligible may file a claim for refund for
a taxable year for which the period of
limitation on credit or refund under
PO 00000
Frm 00039
Fmt 4700
Sfmt 4700
3107
section 6511 has not expired. To qualify
for a refund of tax on damages paid after
August 20, 1996, under a written
binding agreement, court decree, or
mediation award entered into or issued
after September 13, 1995, a taxpayer
must meet the requirements of the 1996
Act, including the requirement that
excludable damages must be received
on account of personal physical injuries.
Special Analyses
This Treasury decision is not a
significant regulatory action as defined
in Executive Order 12866, as
supplemented by Executive Order
13563. Therefore, a regulatory
assessment is not required. Section
553(b) of the Administrative Procedure
Act (5 U.S.C. chapter 5) does not apply
to these regulations, and because the
regulations do not impose a collection
of information on small entities, the
Regulatory Flexibility Act (5 U.S.C.
chapter 6) does not apply. Pursuant to
section 7805(f) of the Internal Revenue
Code, the notice of proposed rulemaking
that preceded these final regulations
was submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on its
impact on small business.
Drafting Information
The principal author of these
regulations is Sheldon Iskow of the
Office of Associate Chief Counsel
(Income Tax and Accounting). However,
other personnel from the IRS and
Treasury Department participated in
their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
amended as follows:
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:
■
Authority: 26 U.S.C. 7805 * * *
Par. 2. In § 1.104–1, paragraph (c) is
revised to read as follows:
■
§ 1.104–1 Compensation for injuries or
sickness.
*
*
*
*
*
(c) Damages received on account of
personal physical injuries or physical
sickness—(1) In general. Section
104(a)(2) excludes from gross income
the amount of any damages (other than
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3108
Federal Register / Vol. 77, No. 14 / Monday, January 23, 2012 / Rules and Regulations
mstockstill on DSK4VPTVN1PROD with RULES
punitive damages) received (whether by
suit or agreement and whether as lump
sums or as periodic payments) on
account of personal physical injuries or
physical sickness. Emotional distress is
not considered a physical injury or
physical sickness. However, damages
for emotional distress attributable to a
physical injury or physical sickness are
excluded from income under section
104(a)(2). Section 104(a)(2) also
excludes damages not in excess of the
amount paid for medical care (described
in section 213(d)(1)(A) or (B)) for
emotional distress. For purposes of this
paragraph (c), the term damages means
an amount received (other than workers’
compensation) through prosecution of a
legal suit or action, or through a
settlement agreement entered into in
lieu of prosecution.
(2) Cause of action and remedies. The
section 104(a)(2) exclusion may apply to
damages recovered for a personal
physical injury or physical sickness
under a statute, even if that statute does
not provide for a broad range of
remedies. The injury need not be
defined as a tort under state or common
law.
(3) Effective/applicability date. This
paragraph (c) applies to damages paid
pursuant to a written binding
agreement, court decree, or mediation
award entered into or issued after
September 13, 1995, and received after
January 23, 2012. Taxpayers also may
apply these final regulations to damages
paid pursuant to a written binding
agreement, court decree, or mediation
award entered into or issued after
September 13, 1995, and received after
August 20, 1996. If applying these final
regulations to damages received after
August 20, 1996, results in an
overpayment of tax, the taxpayer may
file a claim for refund before the period
of limitations under section 6511
expires. To qualify for a refund of tax on
damages paid after August 20, 1996,
under a written binding agreement,
court decree, or mediation award
entered into or issued after September
13, 1995, a taxpayer must meet the
requirements of section 1605 of the
Small Business Job Protection Act of
VerDate Mar<15>2010
18:17 Jan 20, 2012
Jkt 226001
1996, Public Law 104–188 (110 Stat.
1838).
*
*
*
*
*
Steven T. Miller,
Deputy Commissioner for Services and
Enforcement.
Approved: December 6, 2011.
Emily S. McMahon,
Assistant Secretary of the Treasury (Tax
Policy).
[FR Doc. 2012–1255 Filed 1–20–12; 8:45 am]
BILLING CODE 4830–01–P
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
RIN 1545–BK53
Dividend Equivalents From Sources
Within the United States
Internal Revenue Service (IRS),
Treasury.
ACTION: Temporary regulations.
AGENCY:
This document contains
temporary regulations relating to
dividend equivalents for purposes of
section 871(m) of the Internal Revenue
Code (Code). The regulations provide
guidance to nonresident aliens and
foreign corporations that hold notional
principal contracts (NPCs) providing for
payments determined by reference to
payments of dividends from sources
within the United States. The text of the
temporary regulations also serves as the
text of the proposed regulations set forth
in the notice of proposed rulemaking on
this subject in the Proposed Rules
Section in this issue of the Federal
Register.
DATES: Effective Date: These regulations
are effective January 23, 2012.
Applicability Date: For dates of
applicability, see §§ 1.863–7T(f),1.871–
16T(g), 1.881–2T(f), 1.1441–2T(g),
1.1441–3T(k), 1.1441–4T(h), 1.1441–
7T(h), and 1.1461–1T(j).
FOR FURTHER INFORMATION CONTACT:
Mark E. Erwin or D. Peter Merkel at
(202) 622–3870 (not a toll-free number).
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background
This document contains temporary
regulations under section 871(m).
Congress enacted section 871(m)
(originally designated as section 871(l))
on March 18, 2010 in section 541 of the
Hiring Incentives to Restore
Employment Act (HIRE Act), Public
Law 111–147 (124 Stat. 71).
Section 871(m) applies to securities
loans, sale-repurchase transactions
PO 00000
Frm 00040
Fmt 4700
Sfmt 4700
(repos), certain NPCs defined as
‘‘specified notional principal contracts’’
(specified NPCs), and any similar
transactions that provide for a payment
contingent upon or determined by
reference to a U.S. source dividend
(dividend equivalent). Section 871(m)
treats a dividend equivalent as a
dividend from sources within the
United States for purposes of sections
871(a), 881, and 4948(a), and chapters 3
and 4 of subtitle A of the Code. Section
871(m) generally applies to any
dividend equivalent made after
September 14, 2010. With respect to
payments made after March 18, 2012,
section 871(m)(3)(B) provides that any
NPC will be a specified NPC unless the
Secretary determines that such contract
is of a type which does not have the
potential for tax avoidance.
Notice 2010–46, 2010–24 IRB 757,
outlined a proposed framework for
limiting withholding in the case of a
series of securities lending or salerepurchase transactions. While the
Treasury Department and the IRS
anticipate issuing proposed regulations
addressing the issues raised in Notice
2010–46, these regulations do not
address these concerns. See
§ 601.601(d)(2).
Explanation of Provisions
Section 1.871–16T(b) of these
temporary regulations incorporates the
definition of a specified NPC as
provided in section 871(m)(3)(A). These
temporary regulations extend the
applicability of the section 871(m)(3)(A)
statutory definition of a specified NPC
through December 31, 2012. Proposed
regulations set forth in the notice of
proposed rulemaking on this subject in
the Proposed Rules Section in this issue
of the Federal Register outline the
proposed treatment of dividend
equivalents under section 871(m)
beginning January 1, 2013. The Treasury
Department and the IRS believe that an
extension of the statutory definition of
the term specified NPC is necessary to
allow taxpayers and withholding agents
to modify their systems and other
operating procedures to comply with
the rules described in the notice of
proposed rulemaking.
These temporary regulations also
amend several regulations to clarify the
application of section 871(m). For
example, temporary regulations modify
§ 1.863–7 to provide that that section
does not apply to a dividend equivalent
under section 871(m). Section 1.881–
2T(b)(3) provides that section 871(m)
and § 1.871–16T apply to dividend
equivalents received by foreign
corporations. Certain regulations under
section 1441 have been amended to
E:\FR\FM\23JAR1.SGM
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]]>Agencies
[Federal Register Volume 77, Number 14 (Monday, January 23, 2012)]
[Rules and Regulations]
[Pages 3106-3108]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-1255]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9573]
RIN 1545-BF81
Damages Received on Account of Personal Physical Injuries or
Physical Sickness
AGENCY: Internal Revenue Service (IRS), Treasury.
[[Page 3107]]
ACTION: Final regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains final regulations relating to the
exclusion from gross income for amounts received on account of personal
physical injuries or physical sickness. The final regulations reflect
amendments under the Small Business Job Protection Act of 1996. The
final regulations affect taxpayers receiving damages on account of
personal physical injuries or physical sickness and taxpayers paying
these damages.
DATES: Effective Date: These regulations are effective on January 23,
2012.
Applicability Date: For date of applicability, see Sec. 1.104-
1(c)(3).
FOR FURTHER INFORMATION CONTACT: Sheldon Iskow, (202) 622-4920 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains final regulations that amend the Income Tax
Regulations (26 CFR part 1) to reflect amendments made to section
104(a)(2) of the Internal Revenue Code (Code) by section 1605(a) and
(b) of the Small Business Job Protection Act of 1996, Public Law 104-
188, 110 Stat. 1838 (the 1996 Act). On September 15, 2009, a notice of
proposed rulemaking (REG-127270-06) was published in the Federal
Register (74 FR 47152). Written comments responding to the notice of
proposed rulemaking were received. The comments are available for
public inspection at www.regulations.gov or on request. A public
hearing was requested and held on February 23, 2010. After
consideration of all the comments, the proposed regulations are adopted
without substantive change by this Treasury decision. The comments are
discussed in the preamble.
Summary of Comments
The proposed regulations deleted the requirement that to qualify
for exclusion from gross income, damages received from a legal suit,
action, or settlement agreement must be based upon ``tort or tort type
rights.'' The proposed regulations provided, instead, that the section
104(a)(2) exclusion may apply to damages recovered for a personal
physical injury or physical sickness under a statute that does not
provide for a broad range of remedies, and that the injury need not be
defined as a tort.
A commentator suggested that eliminating the tort type rights test
would create confusion about what constitutes a personal injury. The
commentator suggested that the regulations should retain the tort type
rights test but clarify that meeting the test does not depend on the
nature of the remedies or the state law characterization of the cause
of action.
The final regulations do not adopt this comment. Before the 1996
amendment, the section 104(a)(2) exclusion was not limited to damages
for physical injuries or sickness. The tort-type rights test was
intended to distinguish damages for personal injuries from, for
example, damages for breach of contract. Since that time, however,
Commissioner v. Schleier, 515 U.S. 323 (1995), has interpreted the
statutory ``on account of'' test to exclude only damages directly
linked to ``personal'' injuries or sickness. Furthermore, under the
1996 Act, only damages for personal physical injuries or physical
sickness are excludable. These legislative and judicial developments
have eliminated the need to base the section 104(a)(2) exclusion on
tort cause of action and remedy concepts.
A commentator requested that the final regulations address whether
a claimant has constructive receipt or the current economic benefit of
a damage award that is set aside for the claimant's benefit in a trust
or fund, such as a qualified settlement fund described in Sec. 1.468B-
1. Other commentators asked that the final regulations define certain
personal injuries as physical injuries and describe the circumstances
in which emotional distress is attributable to physical injuries.
The final regulations do not adopt these comments because they are
beyond the scope of the proposed regulations, which did not propose
rules on the issues raised by the comments. However, these comments
will be considered if guidance is published on these topics in the
future.
Effective/Applicability Date
These regulations apply to damages paid pursuant to a written
binding agreement, court decree, or mediation award entered into or
issued after September 13, 1995, and received after January 23, 2012.
This September 13, 1995, effective date derives from an exception set
forth in section 1605(d)(2) of the 1996 Act to the statutory effective
date of the amendments to section 104(a)(2).
In addition, taxpayers may apply these regulations to amounts paid
pursuant to a written binding agreement, court decree, or mediation
award entered into or issued after September 13, 1995, and received
after August 20, 1996, and if otherwise eligible may file a claim for
refund for a taxable year for which the period of limitation on credit
or refund under section 6511 has not expired. To qualify for a refund
of tax on damages paid after August 20, 1996, under a written binding
agreement, court decree, or mediation award entered into or issued
after September 13, 1995, a taxpayer must meet the requirements of the
1996 Act, including the requirement that excludable damages must be
received on account of personal physical injuries.
Special Analyses
This Treasury decision is not a significant regulatory action as
defined in Executive Order 12866, as supplemented by Executive Order
13563. Therefore, a regulatory assessment is not required. Section
553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does
not apply to these regulations, and because the regulations do not
impose a collection of information on small entities, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does not apply. Pursuant to
section 7805(f) of the Internal Revenue Code, the notice of proposed
rulemaking that preceded these final regulations was submitted to the
Chief Counsel for Advocacy of the Small Business Administration for
comment on its impact on small business.
Drafting Information
The principal author of these regulations is Sheldon Iskow of the
Office of Associate Chief Counsel (Income Tax and Accounting). However,
other personnel from the IRS and Treasury Department participated in
their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. In Sec. 1.104-1, paragraph (c) is revised to read as follows:
Sec. 1.104-1 Compensation for injuries or sickness.
* * * * *
(c) Damages received on account of personal physical injuries or
physical sickness--(1) In general. Section 104(a)(2) excludes from
gross income the amount of any damages (other than
[[Page 3108]]
punitive damages) received (whether by suit or agreement and whether as
lump sums or as periodic payments) on account of personal physical
injuries or physical sickness. Emotional distress is not considered a
physical injury or physical sickness. However, damages for emotional
distress attributable to a physical injury or physical sickness are
excluded from income under section 104(a)(2). Section 104(a)(2) also
excludes damages not in excess of the amount paid for medical care
(described in section 213(d)(1)(A) or (B)) for emotional distress. For
purposes of this paragraph (c), the term damages means an amount
received (other than workers' compensation) through prosecution of a
legal suit or action, or through a settlement agreement entered into in
lieu of prosecution.
(2) Cause of action and remedies. The section 104(a)(2) exclusion
may apply to damages recovered for a personal physical injury or
physical sickness under a statute, even if that statute does not
provide for a broad range of remedies. The injury need not be defined
as a tort under state or common law.
(3) Effective/applicability date. This paragraph (c) applies to
damages paid pursuant to a written binding agreement, court decree, or
mediation award entered into or issued after September 13, 1995, and
received after January 23, 2012. Taxpayers also may apply these final
regulations to damages paid pursuant to a written binding agreement,
court decree, or mediation award entered into or issued after September
13, 1995, and received after August 20, 1996. If applying these final
regulations to damages received after August 20, 1996, results in an
overpayment of tax, the taxpayer may file a claim for refund before the
period of limitations under section 6511 expires. To qualify for a
refund of tax on damages paid after August 20, 1996, under a written
binding agreement, court decree, or mediation award entered into or
issued after September 13, 1995, a taxpayer must meet the requirements
of section 1605 of the Small Business Job Protection Act of 1996,
Public Law 104-188 (110 Stat. 1838).
* * * * *
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
Approved: December 6, 2011.
Emily S. McMahon,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2012-1255 Filed 1-20-12; 8:45 am]
BILLING CODE 4830-01-P
