No Penalties for Victims of Fraud Act

Section 72(t)(2) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:

Any distribution from an applicable eligible retirement plan to an individual if such distribution is made on account of the individual being a victim of fraud.

For purposes of this subparagraph, the term victim of fraud means an individual who—

(I) submits an application for waiver to the Secretary (in such time and manner as the Secretary may prescribe) which fulfils the documentation requirement of clause (iii), and

(II) is designated as a victim of fraud by the Secretary.

The documentation requirement under this clause is fulfilled if the taxpayer provides documentation (in such time and manner as the Secretary may prescribe) from a law enforcement agency or a court of competent jurisdiction establishing that the individual is the victim of a fraudulent act that resulted in a distribution from an applicable retirement plan.

Rules similar to the rules of subparagraph (H)(v) shall apply.

The term applicable eligible retirement plan means an eligible retirement plan (as defined in section 402(c)(8)(B)) other than a defined benefit plan.

The amendment made by this section shall apply to distributions made after the date of the enactment of this Act.

Not later than 180 days after the date of the enactment of this Act, the Secretary of the Treasury (or the Secretary’s delegate) shall issue guidance on the process for claiming the waiver of early withdrawal penalties for victims of fraud under section 72(t)(2)(N) of the Internal Revenue Code of 1986, as added by section 2 of this Act.

As soon as practicable after the date of the enactment of this Act, the Secretary of the Treasury (or the Secretary’s delegate) shall conduct a public awareness campaign to educate the public about the protections and relief available under section 72(t)(2)(N) of the Internal Revenue Code of 1986, as added by section 2 of this Act.