# No Tax Write-offs for Corporate Wrongdoers Act

This bill prevents companies from deducting legal settlements and fines as business expenses on their taxes when they've been found guilty of wrongdoing. Right now, if a corporation gets caught breaking the law and has to pay a settlement or fine, they can often write off that cost as a business expense, which reduces their taxable income and effectively lowers their tax bill. This bill would close that loophole.

Here's what that means in practical terms: When a company breaks environmental laws, defrauds consumers, violates labor standards, or commits other crimes and gets penalized, taxpayers essentially end up subsidizing part of that penalty through lost tax revenue. For example, if a company pays a $100 million settlement for illegal conduct and normally pays 21% in corporate taxes, they might deduct that settlement and save $21 million in taxes. Under this bill, they couldn't make that deduction, so they'd pay the full $100 million penalty without a tax break.

The bill would apply to settlements and fines related to violations of federal, state, or local laws. This affects any corporation that faces legal consequences for wrongdoing—whether that's environmental violations, workplace safety failures, consumer fraud, or other illegal activities. The impact would be felt most by larger corporations that regularly face significant penalties, as they're the ones who currently benefit most from these tax deductions. Supporters argue this makes the punishment for corporate wrongdoing more meaningful and ensures companies can't use the tax system to soften the consequences of breaking the law.

No Tax Write-offs for Corporate Wrongdoers Act

Leahy, Patrick J.

No Tax Write-offs for Corporate Wrongdoers Act This bill denies a tax deduction for any amount paid or incurred for punitive damages in connection with any judgment in, or settlement of, any legal action. The bill also requires the gross income of a taxpayer to include any amount paid to or on behalf of the taxpayer as insurance or otherwise by reason of the taxpayer's liability (or agreement) to pay punitive damages.