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Arizona PIRG Applauds Sen. McCain for Co-Sponsoring Bill Barring Tax Write-Offs for Corporate Wrongdoing
Statement by Serena Unrein, Public Interest Advocate for the Arizona Public Interest Research Group (Arizona PIRG), on Sen. McCain’s decision to co-sponsor bipartisan legislation that would prevent corporations from reaping massive tax windfalls from the payments made to settle allegations of wrongdoing. This comes on the heels of the Department of Justice announcement that the majority of JPMorgan’s expected $13 billion mortgage abuse settlement could be tax deductible.
“We applaud Senator McCain for standing up for Arizona’s taxpayers by co-sponsoring legislation that would stop corporations from being able to take tax deductions on settlements they pay for harming the public.
“For every dollar that corporations claim in tax deductions for their wrongdoing, the public must pick up the tab. The proposed legislation would help ensure that taxpayers don’t have to pay twice for corporate misdeeds.
“While federal law forbids companies from deducting public fines and penalties from their taxes, payments made as part of a settlement can be treated differently. Companies that cut deals with an agency to resolve charges through a legal settlement typically manage to deduct the penalties as a tax write-off, unless they are specifically forbidden from doing so. In essence, companies are allowed to receive a tax break for their wrongdoing, and that shouldn’t happen.
“Ordinary citizens don’t get deduct their parking tickets or library fines from their taxes. Corporations like JPMorgan shouldn’t be able to deduct their settlements for wrongdoing, either. The settlement loophole costs taxpayers billions of dollars each year. It needs to be closed, and we applaud Sen. McCain for doing something about it.
“If this was already the law of the land, we could have rest assured that at least most of the recent JPMorgan settlement for lending abuses wouldn’t become a tax write-off.”
For more information, download the Arizona PIRG Education Fund report on the tax implications of legal settlements: Subsidizing Bad Behavior: How Corporate Legal Settlements for Harming the Public Become Lucrative Tax Write-Offs.
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