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DelBene Introduces Bill Eliminating Corporate Tax Breaks that Protect Perpetrators of Sexual Misconduct

The Stop Tax Breaks for Sexual Misconduct Act would end tax breaks allowing companies to deduct the cost of sexual harassment settlements.

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Washington, D.C., December 1, 2017 | comments

WASHINGTON, D.C. – Congresswoman Suzan DelBene (WA-01) today introduced legislation that would eliminate tax breaks that currently allow corporations to deduct expenses associated with instances of sexual misconduct by their employees.

“It is coming into sharp focus that for too long settlements have been paid by powerful figures to victims of sexual misconduct in exchange for their signing non-disclosure agreements, keeping perpetrators’ reputations intact and company names out of headlines. This payment-for-silence system has protected predators, propped up toxic work environments and prevented potential future victims from being informed and able to protect themselves. It’s shameful that our tax code allows corporations to deduct settlement payments, propagating this rampant problem,” DelBene said. “As a society, if we’re going to demand corporations invest in creating an environment and culture that encourages people to come forward and report abuses, we need transparency and accountability, not settlements and silence. That’s why I introduced the Stop Tax Breaks for Sexual Misconduct Act. My bill would make the price for silence steeper for corporations, taking one step toward incentivizing real solutions to end sexual misconduct in the workplace rather than a system of sweeping things under the rug.”

Under current law, corporations can deduct settlements paid to victims of sexual misconduct, insurance premiums for sexual misconduct policies and associated attorney’s fees as an “ordinary and necessary expenses.” However, victims who receive settlement payouts or damages in a sexual misconduct case are not currently allowed to exclude those payments from their taxable income, whereas payouts for physical injuries, for example, are excluded from taxable income.

DelBene’s bill would:

  • Eliminate the ability of corporations to deduct damages or settlements paid to victims of sexual misconduct by an employee.
  • Eliminate the ability of corporations to deduct attorney’s fees associated with resolving any case of sexual misconduct by an employee.
  • Eliminate the ability of corporations to deduct the cost of sexual misconduct insurance premiums from their federal taxes.
  • Exclude from taxable income any amount received as damages or settlement in a case of sexual misconduct.

Reps. Terri Sewell (AL-07) and Judy Chu (CA-27) are original cosponsors of DelBene’s bill. All three Congresswoman serve on the House Ways and Means Committee, which has jurisdiction over the tax code.

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