Still Trying for the Trial Lawyer Tax Break

The American Association for Justice is trying to keep this story out of the news, but according to the latest disclosure reports the AAJ is still heavily lobbying Congress and the Obama Administration for a $1.6 billion trial lawyer tax break that would encourage even more litigation.

Third Quarter 2010 lobbying disclosure reports at the House Clerk’s Office reveal that the Washington Tax Group LLC spent $40,000 in the three-month period lobbying on behalf of the AAJ for the legislation to allow a tax deduction for litigation expenses advanced by the attorneys in contingency fee cases. Not only did the tax lobbyists appeal to the House and Senate, which have before it two bills (H.R. 2519 and S. 437, respectively), but they also contacted the U.S. Treasury.

The trial lawyers turned to Treasury after its congressional lobbying the special-interest tax break drew unflattering attention. A tax interpretation or some other administrative action by Treasury might achieve the same policy goal with via less public (i.e., democratic) means, they figured.

Thankfully, news of the more surreptitious strategy also got out, and there’s even more fierce opposition from business groups (NAM-signed letter) and medical associations, including the American Medical Association.

The ranking Republicans on the House Ways and Means Committee and Senate Finance Committee have written Treasury Secretary Geithner demanding more information and documentation. Tax policy is indeed a matter best left to the policymakers, that is, Congress.

According to the AAJ’s own 3rd Quarter lobbying form, the association lobbied the Senate and House on the legislation but did not approach Treasury. Well, that’s why you hire the experts.

P.S. Trial lawyers occasionally try to claim that the new tax treatment would be fair, just like the way other businesses are handled. See, for example, this recent National Law Journal op-ed by Brian Kabateck and Karen Liao, attorneys in Los Angeles. But as the AMA and other medical groups wrote Geithner in a Sept. 1 letter:

[A] change in tax policy by the Treasury Department would conflict with long-standing state ethics rules against trial attorneys providing financial assistance to clients without the expectation of being paid back upon the successful conclusion of the case. These rules are meant to prevent a conflict of interest whereby a trial attorney’s financial stake in a case is put ahead of the client’s desire for justice.

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