How Major Taxpayers Are Able to Deduct Settlements with the Government

In this NY Times article entitled “Tax Deductions Blunt Impact of Large Corporate Settlements, Report Says” Liz Moyer points out that:
 
 “Corporations continue to use big civil legal settlements with federal regulators as a way to deduct billions of dollars from their American tax bills, largely because the regulators fail to forbid the practice in the terms of the settlements.”
 
For example the $20.8 billion dollar settlement from the BP oil spill had $15.3 billion identified as tax deductible.   Her article takes a look at the 10 biggest settlements by five federal regulators since 2010 and found that of $80 billion in settlements, $48 billion was tax deductible resulting in $17 billion in savings to the firms picked up by U.S. taxpayers.  She also points out this is more than all of the estate and gift taxes combined. 
 
I found this to be an interesting read and thought you may too. 
 

 

About the author

Mike Gregory is a professional speaker, an author, and a mediator. You may contact Mike directly at mg@mikegreg.com and at (651) 633-5311. Mike has written 12 books (and co-authored two others) including his latest book, The Collaboration Effect: Overcoming Your Conflicts, and The Servant Manager, Business Valuations and the IRS, and Peaceful Resolutions that you may find helpful. [Michael Gregory, ASA, CVA, NSA, MBA, Qualified Mediator with the Minnesota Supreme Court]