This story appeared in Bank Digest.
Senators Jack Reed (D-RI) and Chuck Grassley (R-Iowa) have introduced bipartisan legislation--The Government Settlement Transparency & Reform Act--intended to close a loophole that has allowed some corporations to reap tax benefits from payments made at government direction stemming from settling misdeads.
Corporations accused of illegal activity routinely settle legal disputes with the government out of court because it allows both the company and the government to avoid the time, expense, and uncertainty of going to trial. Federal law prohibits companies from deducting public fines and penalties from their taxable income. But under current law, companies often may write off any portion of a settlement that is not paid directly to the government as a penalty or fine for violation of the law. This allows some companies to lower their tax bill by claiming settlement payments to non-federal entities as tax deductible business expenses.