Senators Raise Questions Over Deductibility Of Settlements With Government
by Leroy Baker, Tax-News.com, New York
18 December 2003

The two senior figures on the Senate Finance Committee requested earlier this week that a study be undertaken into how often firms deduct from their taxes settlement amounts resulting from government investigations.

In a statement, Committee Chairman Charles Grassley (R – Iowa) said: “Taxpayers could be subsidizing hundreds of millions of dollars in penalties. If so, that's unacceptable."

Grassley, supported by the ranking Democrat on the Finance Committee, Max Baucus of Montana, has asked that the General Accounting Office now investigate the federal tax treatment of settlements arrived at between companies and government agencies in response to the recent $1.4 billion settlement arrived at by the SEC and various Wall Street firms over unsound research.

"The SEC's global settlement got a lot of headlines but not a lot of punishment of the wrongdoers," observed Grassley. "We need to know how many other commissions and agencies are letting wrongdoers off with a slap on the wrist instead of hitting them where it hurts - their bank accounts," he said.

Both Senators are sponsoring new legislation that will limit the ability of corporations to deduct such settlements from their tax liabilities.

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