"Supreme Court Throws IRS a Disgorgement Deduction Knuckleball"

Peter Lowy quoted in "Supreme Court Throws IRS a Disgorgement Deduction Knuckleball"

In an article in Tax Notes on July 2, 2020, Chamberlain Hrdlicka shareholder Peter Lowy is quoted relating to the June 22, 2020 Supreme Court opinion in Liu v. SEC, in which the Supreme Court upheld the SEC’s access to disgorgement as a remedy.  The article points out that in the process, the Court cut holes in the IRS and Treasury’s position that disgorgement is always a penalty, and attributes to Lowy the observation that Liu could impact ongoing controversies regarding the deduction of disgorgement payments that predate the effective date of the TCJA.  Lowy emphasized that while the central question after the TCJA is whether a payment fits the restitution exception, before the changes the issue turned on whether the payment was a penalty. 

Lowy further observed that post-TCJA, the new identification rule — requiring potentially deductible payments to bear a label using a variation of restitution, remediation, or compliance in the relevant order or agreement — should eliminate many possible disputes for post-TCJA payments.