February 26, 2010

Proposed Legislation Would Eliminate Tax Deduction for Punitive Damages

Floyd Norris of the New York Times reports on the Bipartisan Tax Fairness and Simplification Act of 2010, which includes a provision that defendants who are required to pay punitive damages cannot deduct those payments as a business expense.

The article quotes Senator Judd Gregg of New Hampshire, the top Republican on the Budget Committee: “I always thought that was pretty absurd. It is significantly less punitive if you get a deduction.” Senator Gregg has issued a press release about the bill (S3018), but the press release says nothing about punitive damages.

As we noted last year, the Obama administration has also proposed to make punitive damages non-deductible.