n-12-12.pdf

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing.

This collection currently includes the publisher’s available advance-release directory. Historical bulletin renditions are discovered separately; an advance-release record alone does not certify the collection archive complete.

# Part III - Administrative, Procedural, and Miscellaneous

## Restitution Payments under the Trafficking Victims Protection Act of 2000

Notice 2012-12

### PURPOSE

This notice provides guidance on the federal income tax treatment of mandatory
restitution payments awarded under 18 U.S.C. § 1593, as added by § 112(a) of the
Trafficking Victims Protection Act of 2000 (the Act), Division A of Pub. L. 106-386, 114
Stat. 1488-89 (2000).

### BACKGROUND

Congress enacted the Act "to combat trafficking of persons, a contemporary
manifestation of slavery whose victims are predominantly women and children, to
ensure just and effective punishment of traffickers, and to protect their victims." Section
102(a) of the Act. Congress found that "[v]ictims are often forced through physical
violence to engage in sex acts or perform slavery-like labor" and that "[s]uch force
includes rape and other forms of sexual abuse, torture, starvation, imprisonment,
threats, psychological abuse, and coercion." Section 102(b)(6) of the Act.

Under 18 U.S.C. §§ 1581 through 1594, as amended, Congress has defined
criminal acts relating to peonage, slavery, and trafficking in persons and established the
fines and terms of imprisonment for persons convicted of the criminal acts. The criminal
acts include (i) holding a person to a condition of peonage; (ii) kidnapping or carrying

<!-- PageBreak -->

away a person to sell the person into involuntary servitude or to be held as a slave, (iii)
providing or obtaining a person's services or labor by actual or threatened use of certain
means including force, physical restraint, serious harm, and abuse of legal process, and
(iv) sex trafficking of children or by force, fraud, or coercion. See 18 U.S.C. §§ 1581,
1583, 1589, and 1591.

Under 18 U.S.C. § 1593, a court must order restitution to a victim for any offense
committed under 18 U.S.C. §§ 1581 through 1594, directing a defendant to pay the
victim the full amount of the victim's losses. 18 U.S.C. § 1593(b)(1).

The full amount of a victim's losses includes costs for medical services relating to
physical, psychiatric, or psychological care; costs for physical and occupational therapy
or rehabilitation; necessary transportation, temporary housing, and child care expenses;
lost income; attorneys' fees and other costs; and other losses the victim suffers as a
proximate result of the offense. See 18 U.S.C. §§ 1593(b)(3) and 2259(b)(3). Under
18 U.S.C. § 1593(b)(3), a victim's losses also include the greater of the gross income or
value to the defendant of the victim's services or labor or the value of the victim's labor
as guaranteed under the minimum wage and overtime guarantees of the Fair Labor
Standards Act (29 U.S.C. § 201 et seq.).

### FEDERAL TAX TREATMENT OF BENEFITS

Mandatory restitution payments awarded under 18 U.S.C. § 1593 are excluded
from gross income for federal income tax purposes.

### DRAFTING INFORMATION

The principal author of this notice is Sheldon Iskow of the Office of
Associate Chief Counsel (Income Tax & Accounting). For further information

<!-- PageBreak -->

regarding this notice, contact Mr. Iskow at (202) 622-4920 (not a toll-free call).