No Tax Write-Offs For Wrongdoing

END WRITE OFFS FOR WRONGDOING

Paying for misdeeds shouldn’t be a tax write off. Unlike regular citizens and small businesses, large corporations accused of wrongdoing like oil spills and mortgage scams typically negotiate out-of-court settlements to resolve charges from government regulators. The company agrees to make a payment and the government agency agrees not to prosecute the alleged misdeed. Annually, billions of dollars are exchanged between corporations accused of crimes and government agencies attempting to hold them accountable.

These settlements shouldn’t just be another cost of doing business.

Unfortunately, that’s exactly what these payments often end up being. 

Unless agencies specify otherwise, these corporations usually deduct the costs of out-of-court settlements on their taxes as ordinary business expenses, leaving taxpayers to pick up the tab. 

Especially when Congress is struggling to reduce budget shortfalls, every dollar that corporate wrongdoers avoid paying by deducting a settlement must be made up for through higher tax rates for others, cuts to public programs, or an increase in the national debt.

The public often can’t even know when these settlement agreements come with a tax deduction because there are no standards for transparency. Government agencies aren’t required to publish the settlement agreements or publicly post the details, and corporations don’t disclose whether or not they deduct the payments from their taxes.

That’s how Bank of America, accused of consumer fraud that contributed to the financial crisis, can write off up to $11 billion of their recent settlement agreement and leave taxpayers to pick up the tab, with no one the wiser.

THERE IS A SOLUTION

We’re calling on Congress to pass bipartisan common-sense legislation to restrict write offs for wrongdoing. We are also supporting a bipartisan bill to make settlement agreements between government agencies and corporations more transparent, so that Americans can know the real value of the deals being signed on their behalf. In the meantime, we’re pushing agencies to update their settlement policies and deny tax deductions for corporate misbehavior. 

Issue updates

News Release | U.S. PIRG | Tax

BP’s $18.7 Settlement Today for Gulf Spill Appears to Be Mostly Tax Deductible

BP's settlement today for the Gulf oil spill appears to contain a huge hidden tax windfall for the company. USPIRG calls on the Justice Department to ensure taxpayers aren't subsidizing the oil giant's misdeeds.

> Keep Reading
News Release | U.S. PIRG | Tax

U.S. PIRG COMMENDS THE BIPARTISAN TRUTH IN SETTLEMENTS ACT AS A WIN FOR AMERICAN TAXPAYERS

U.S. commends a House bill to disclose when agencies allow corporations to write off as a tax deduction the out-of-court settlements they sign with corporations requiring payment to resolve charges of wrongdoing. A counterpart bill was already introduced in the Senate.

> Keep Reading
News Release | U.S. PIRG | Tax

Letter Rebuts Misleading Claims by Chamber of Commerce

U.S.PIRG organized this coalition letter to rebut a misleading letter from the U.S. Chamber of Commerce suggesting that Americans shouldn't know when federal agencies sign out-of-court settlements to resolve charges of corporate wrongdoing.

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News Release | U.S. PIRG | Tax

U.S. PIRG COMMENDS THE BIPARTISAN TRUTH IN SETTLEMENTS ACT AS A WIN FOR AMERICAN TAXPAYERS

U.S. PIRG applauds a new bill that would shine a light on settlement deals made between federal agencies and corporations charged with misconduct. These settlement typically allow the corporations to make a payments instead of facing charges in a trial. The bill, cosponsored by Senators Lankford (R-OK) and Warren (D-MA), would require that when deals enable the corporation to use the settlement as a tax write off that reduces the value to the public, then this information must be publicly disclosed.

> Keep Reading

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Media Hit | Tax

How Much of Its Record Settlement Will S&P Write Off at Tax Time?

First comes the settlement. Next comes the tax write-off?

Standard & Poor’s Ratings Services on Tuesday announced a record $1.5 billion payout to resolve crisis-era lawsuits with the Justice Department, states and a pension fund over inflated residential mortgage deals. Collectively, the settlement total is 10 times larger than any other previously involving a credit-rating firm.

But how much of the unprecedented round of settlements could end up being written off?

Michelle Surka, a program associate with the nonpartisan consumer advocacy group U.S. Public Interest Research Group, said she thinks she has an answer based on an early analysis: about $290 million.

That’s about a $50 million break on state taxes but also the potential to write down $240 million of federal taxes owed in the more than dozen states involved in the settlement, Ms. Surka said.

> Keep Reading
Media Hit | Tax

When Company Is Fined, Taxpayers Often Share Bill

U.S. PIRG analysis and quotes featured in the New York Times Business Day section.

> Keep Reading
News Release | U.S. PIRG | Budget, Tax, Transportation

Obama Budget Closes Tax Loopholes, Cuts Wasteful Spending, but Falls Short of Ending Offshore Tax Dodging

"President Obama’s budget deserves praise for closing egregious offshore tax loopholes and preventing companies with enough lawyers from using tax havens to get their tax bill down to zero. Unfortunately it fails to end the incentive for wealthy multinationals to take advantage of tax havens, and would fall short of putting an end to offshore tax dodging.

> Keep Reading
News Release | US PIRG | Tax

S&P Settlement Could Leave Taxpayers Partly Underwater Again

Standard & Poor’s (S&P), the bond-rating agency whose past practices have been tied to the mortgage crisis, is in negotiations with the U.S. Justice Department to settle allegations of civil fraud with a payout of over $1 billion. Unless the Justice Department specifically forbids it, the deal could allow S&P to claim the payment as a deductible business expense worth more than $350 million.

> Keep Reading

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