Nov. 6, 2013
Public Citizen Applauds Senators Reed and Grassley for Introducing the Government Settlement Transparency and Reform Act (S. 1654)
Corporations Should Not Be Able to Deduct Fines and Penalties From Their Taxes
Note: Today U.S. Sens. Jack Reed (D-R.I.) and Charles Grassley (R-Iowa) introduced S. 1654, legislation designed to rescind tax write-offs for illegal corporate behavior. This important bipartisan legislation would close a loophole that allows corporate regulatory violators to reap tax benefits when paying fines for misdeeds.
WASHINGTON, D.C. – The “Government Settlement Transparency & Reform Act,” introduced today by U.S. Sens. Jack Reed (D-R.I.) and Charles Grassley (R-Iowa), is an important step for corporate accountability in the regulatory sphere, Public Citizen said today.
“A corporate penalty is effective only if it hits the company where it hurts: in their bottom line,” said Lisa Gilbert, director of Public Citizen’s Congress Watch division. “It is unjust in the extreme for taxpayers to subsidize settlements when companies commit corporate crime. We are happy to see these senators take the first step to close this settlement loophole.”
Current law stops companies from deducting penalties from their taxable income, but the offending corporations still often write off other parts of a settlement. This allows many companies to lower their tax bills by claiming settlement payments to non-federal entities as tax-deductible business expenses.
“Regulations to protect our health, safety and financial system are in place for a reason,” said Amit Narang, regulatory policy advocate for Public Citizen’s Congress Watch division. “If companies feel they can write off penalties they receive, the regulations lose their deterrent effect.”
The Reed-Grassley bill amends subsection (f) of Section 162 of the Internal Revenue Code to deny tax deductions for certain fines, penalties and other amounts related to a violation, investigation or inquiry into the potential violation of any law.