Sens. Chuck Grassley (R-Iowa) and Jack Reed (D-R.I.) want to make sure that corporations don’t get a tax break for paying off a settlement.
{mosads}Corporations currently can’t deduct a fine paid to the government as a legitimate business expense.
But Grassley, a former Senate Finance chairman, and Reed want to bar companies from writing off any part of a settlement that wasn’t handed over to the government, as some currently do.
“A penalty should be meaningful or it won’t have the deterrent effect it’s supposed to have,” Grassley said in a statement. “Federal agencies too often don’t consider the tax implications, but you can be sure the company does.”
“Preying on consumers or defrauding investors shouldn’t be classified as a business expense,” Reed added. “If a company is paying thousands, millions, or even billions in fines, it shouldn’t get a tax break for those same misdeeds, it should be held accountable.”
Under the senators’ proposal, the government and a company would have to hash out a pre-filing agreement on how treat a settlement for tax purposes.