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house Bill H.R. 2486

Eliminating a Tax Deduction for Businesses That Pay Fines to the Government

Argument in favor

A corporation that is the subject of legal action by the government should deal with the full impact of the damages or settlement they are forced to pay. Eliminating the deduction protects taxpayers.

Mickb's Opinion
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07/01/2015
To me this like telling a kid dont hit your sister heres a treat go in time out. Punishment with a perk is not a real punishment
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6od's Opinion
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12/25/2015
I don't get to deduct parking tickets or traffic violations, so why should major corporations be able to deduct their mistakes and unlawful actions?
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Steven's Opinion
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05/06/2016
Personal accountability!! It's not either or you're responsible for both, live with it!
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Argument opposed

These deductions exist because businesses are already required to pay taxes in addition to the litigation expenses, and removing them could cause people to lose their jobs and businesses to close.

Scott's Opinion
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08/06/2015
Wait, a business or business owner commits a violation of federal guidelines, must pay a fine (as opposed to criminal penalties) and then get to deduct the fine from their taxes? Hahahahaha. What idiocy!
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nan's Opinion
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07/07/2015
It sounds as if 'damages' means a fine leveled upon the company. This company does not have a right to a tax break for paying a fine.
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David's Opinion
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07/22/2015
Permitting a deduction means UZ taxpayers share the burden of the damages and fines. NO!
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What is House Bill H.R. 2486?

This bill would amend the Internal Revenue Code to remove a tax deduction for damages paid by businesses in settling litigation with the government.


Current law allows businesses to claim a tax deduction for damages they pay resulting from a judgement or settlement brought against them by a government. Those damages can either be of a compensatory or punitive nature. They can also include in their gross income any amount paid to insurance as a result of the liability for punitive damages.

Impact

Businesses that have settled litigation or paid damages to the government, the Internal Revenue Service (IRS), and the Department of Justice (DOJ).

Cost of House Bill H.R. 2486

A CBO cost estimate is not available.

More Information

In-Depth: This bill sponsor, Rep. Peter Welch (D-VT), believes that:

“Allowing a financial institution found guilty of criminal activity and harming consumers the benefit of writing off related penalties is offensive and adds insult to injury to the taxpayer. This legislation is a no brainer and Congress should act on it promptly to protect the American taxpayer.”

The financial institutions Rep. Welch referred to in his statement were Citicorp, JPMorgan Chase, Barclays, the Royal Bank of Scotland and UBS — which admitted guilt and were fined $5 billion for manipulating currency markets.

When Bank of America was fined $16.65 billion over its mortgage-backed securities business, it was allowed to deduct up to $11.63 billion from its taxes, which ultimately saved the company about $4 billion from its total tax bill.


Media:

Summary by Eric Revell
(Photo Credit: Flickr user getarchurchy)

AKA

Stop Deducting Damages Act of 2015

Official Title

To amend the Internal Revenue Code of 1986 to disallow deductions for the payment of compensatory and punitive damages to a government, and for other purposes.

bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
  • The house has not voted
      house Committees
      Committee on Ways and Means
    IntroducedMay 20th, 2015