Loss of exemptions could cost some taxpayers
Tax reform conferees named. Let the tax mixing begin!

Sexual harassment settlement tax deduction eliminated in tax reform bills

Time persons of the year 2017Time's person of the year for 2017 is a lot of people.

The magazine selected all the women and men who who publicly spoke about being victims of sexual harassment and abuse as a way to stop it and help others who have been victims, known on social media as the #MeToo movement.

Ironically, today's announcement of Time's 90th most notable person (called Man or Woman of the year until 1999) was overshadowed by the continuing sexual harassment controversy in the political world.

Sitting and wannabe Senator troubles: Roy Moore, who is seeking Attorney General Jeff Session's former Senate seat in Alabama, is dogged by allegations of reported interest in teenage girls when he was a 30-something district attorney.

The charges from several women have become a central issue in the 70-year-old former judge's campaign. Alabama voters will decide on Dec. 12, so we're in for extensive coverage of the race until then … and probably well after election day, too.

Then there's already sitting Sen. Al Franken. The Democrat from Minnesota today faced calls from more than two dozen in his Party to resign his seat in the wake of more charges of improper sexual advances.

UPDATE: Franken announced his resignation on Thursday, Dec. 7.

Capitol Hill self-disciplinary, legislative actions: Congress already has taken steps to police itself, with the House and Senate in the process of establishing training sessions to educate members on how to not sexually harass or assault other people. (I never thought I'd ever have to type such a sentence.)

In addition, lawmakers have reacted legislatively after learning that some of their colleagues settled sexual harassment lawsuits or threats of legal action by using federal dollars to pay accusers.

Rep. Tom Marino (R-Pennsylvania) on Nov. 28 introduced H.R. 4458, which would prohibit members of Congress from using taxpayer funds in sexual harassment settlements.

This week (Dec. 5), Marino followed up that bill by introducing H.R. 4540. This companion piece of legislation would require that members of Congress who already have made such taxpayer-funded sexual harassment settlements pay that money back, with interest, from their own bank accounts.

"Congressmen and Senators should not be allowed to play by a different set of rules and held to a different set of standards than the American public," said Marino. "Sexual harassment in the workplace is unacceptable by anyone and taxpayers should not be on the hook for the actions of others."

Tax reform axes harassment deduction: The issue of sexual harassment also made it into the tax reform bills that have passed the House and Senate and are awaiting action by a conference committee to meld them into one piece of legislation to be voted on again by both chambers.

The original House version of H.R. 1, the Tax Cuts and Jobs Act, and its Senate-amended version each include a provision that would disallow tax deductions on sexual harassment legal settlements.

Current tax law allows many payouts and legal fees resulting from these types of cases to be written off as business expenses.

The tax bill language came from an amendment, authored by Colorado Republican Rep. Ken Buck, that was added during House debate of H.R. 1 last month. The addition to the bill, noted Buck in a press release, would eliminate "the business expense deduction for hush money associated with sexual assault and sexual harassment cases."

For all y'all tax policy wonks, the tax bill's specific language, found on pages 188 and 189, says:

Sexual harassment settlement tax deductions axed in tax reform bill

Sexual harassment settlement tax deductions axed in tax reform bill2

In case you can't read that image above on your mobile device, here's the text version:

SEC. 13307. DENIAL OF DEDUCTION FOR SETTLEMENTS SUBJECT TO NONDISCLOSURE AGREEMENTS PAID IN CONNECTION WITH SEXUAL HARASSMENT OR SEXUAL ABUSE.

    (a) DENIAL OF DEDUCTION. — Section 162 is amended by redesignating subsection (q) as subsection (r) and by inserting after subsection (p) the following new subsection:

    "(q) PAYMENTS RELATED TO SEXUAL HARASSMENT AND SEXUAL ABUSE. -- No deduction shall be allowed under this chapter for —

    "(1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or

    "(2) attorney's fees related to such a settlement or payment."

    (b) EFFECTIVE DATE. — The amendments made by this section shall apply to amounts paid or incurred after the date of the enactment of this Act.

Given all the other things the House and Senate tax bill conferees must resolve, I suspect this identical section in both versions of the bill will make it into the final measure and ultimately into law.

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