This, Amazingly Enough, Was Not a Surprise

The IRS defines income you must report:

Illegal activities.

Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Schedule 1 (Form 1040), line 8z, or on Schedule C (Form 1040) if from your self-employment activity....

Bribes.

 If you receive a bribe, include it in your income.

 Stolen property.

 If you steal property, you must report its fair market value in your income in the year you steal it unless you return it to its rightful owner in the same year.

This surprises me not at all.  Some years back, IRS and California Franchise Tax Board treated illegal income differently.  IRS allowed criminals to deduct business expenses for their illegal businesses.  California required reporting the income but did not allow deducting the business expenses.