Stay current on changes and developments in corporate law with a wide variety of resources and tools.
By Casey Wooten
July 30 — The Senate Homeland Security and Government Affairs Committee approved on a voice vote legislation that would require federal agencies to publish the details of settlements, so the public could determine if the payments are tax deductible.
The Truth in Settlements Act (S. 1898), introduced by Sen. Elizabeth Warren (D-Mass.) and approved by the committee July 30, would require agencies to report publicly the nature of a settlement payment, which can affect its tax treatment and thus the net cost imposed on the defendant.
In most instances, when federal agencies bring a case against a corporation, the agencies choose to settle with the defendant rather than go to trial. That, the bipartisan bill's proponents say, can leave the public unaware of how much the offender actually paid, given that payments classified as restitution or compensation are tax deductible, while penalties and fines aren't.
“Most often you hear of these large fines, but in fact what it does is they use it to write off their taxes. So the net effect for the business is very, very small compared to what it published,” said Sen. Tom Coburn (R-Okla.), the committee's ranking member and bill co-sponsor.
Recent settlements between the government and large banks related to the mortgage crisis have sparked opposition because portions of the agreed-upon payments may be tax deductible.
Warren said from the Senate floor Jan. 9—the day after she introduced the bill—that settlements that seem tough can often “end up looking like sweetheart deals” when all the details are made public.
Covered settlements would include agreements that are entered into by an executive agency, are related to a violation of criminal or civil law and require a payment of $1 million or more by non-federal entities.
The head of each agency would also have to make available to the public a list of covered settlement agreements, including names of the parties, a description of the claims settled and the amount each party is obligated to pay. The information would have to remain publicly available for five years.
As part of the bill, if the settlements are considered confidential, agencies would have to explain why.
The bill also would require that corporations disclose in Securities and Exchange Commission filings any deductions received from paying fines or settlements.
To contact the reporter on this story: Casey Wooten in Washington at email@example.com
To contact the editor responsible for this story: Cheryl Saenz at firstname.lastname@example.org
Text of S. 1898 can be found at http://www.warren.senate.gov/files/ documents/Truth%20In% 20Settlements%20Bill.pdf.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)