The article you mention does not say it is not taxable, it says it is not subject to withholdings. These two things are different. It clearly says you must report it on your personal income tax return. The article is geared towards the employer saying they are not responsible for withholding taxes on the penalty, but it is not exempting the employee from paying regular income tax on it like they would on something like interest received from the IRS.
It is telling them they must issue a 1099 which means the IRS still wants to know you received the income so they can still tax you on the income. You just have to make the payment yourself.
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