As reported in a previous Sidley Update, recent tax reform legislation (enacted in December 2017) prohibits companies from deducting any payments to a government — including federal, state and local — for the violation of any law. But the law creates an exception if the court order or settlement agreement identifies such amounts paid as restitution or to come into compliance with the law. The Internal Revenue Service (IRS) will consider on a case-by-case basis whether a settlement of environmental payments constitutes restitution or to come into compliance sufficient to allow tax deductions. In a recent IRS bulletin, the agency indicated that a court order or settlement that states on its face that a payment is restitution or to come into compliance will serve as an indication, but not a conclusive demonstration, that the amount is tax deductible. The agency is taking comments on how it might shape a proposed rule to address tax deduction issues under the new tax law through May 18, 2018.