Manufacturers Still Oppose Truth in Settlements Act

Unfortunately, the House Committee on Oversight and Government Reform Committee is scheduled to consider the Senate-passed Truth in Settlements Act (S. 1109) on March 1. S. 1109 requires federal agencies to publicly post information on their websites about settlement agreements greater than $1 million and indicate whether the settlement payments are tax deductible. The NAM objected to this bill prior to its passage in the Senate and continues to be concerned about the negative impact this legislation may have on manufacturers.

While the alleged purpose of the Truth in Settlements Act is to make settlements between federal agencies and businesses more transparent, in reality the legislation will force federal agencies and businesses to release information that can easily be misunderstood and mischaracterized and actually discourage time and cost-saving settlements. Confidentiality is often an important part of any settlement where there is no admission of wrongdoing, but where it is to the advantage of both parties to settle their differences without lengthy and costly litigation. Basically, S. 1109 throws the advantage of reaching a settlement agreement out the window, creating more litigation and draining resources for both businesses and the federal government.

Most troubling, however, are the provisions of the bill that require disclosure of what portions of the settlement agreement are tax deductible. It seems unlikely that Congress would focus such additional scrutiny on the deductibility of payments stemming from a settlement without intending to deny these deductions in the future. That is because there have been many bills introduced over the years seeking to do just that, and S. 1109 is a slippery slope toward that end. In an income tax-based system, denying a deduction for all or part of costs incurred in the ordinary course of business, such as compensatory amounts paid pursuant to legal settlements, changes the nature of the tax system, from a tax on income to a tax on gross receipts. At a time when it costs more to manufacture in the United States than anywhere else in the world, lawmakers should oppose efforts to deny the tax deductibility of necessary business expenses.

The NAM continues to oppose the Truth in Settlements Act and urges Congress not to support this potentially harmful legislation.

Christina Crooks

Christina Crooks is Director, Tax Policy for the National Association of Manufacturers, where she is responsible for providing NAM members with important updates on tax policy, pensions, and corporate finance and management issues and representing the NAM’s position on these issues before Congress and the Administration. Within the NAM tax policy portfolio, Christina focuses on the R&D tax credit and tax extenders, and serves as the Executive Secretary for the R&D Credit Coalition and a leader in the Broad Tax Extenders Coalition.

Before joining the NAM, Crooks served as senior manager of government affairs for Financial Executives International, where she advocated on behalf of the association’s membership of senior-level business executives on tax, corporate treasury, pension and benefit issues. Previously, she worked as a legislative assistant to Rep. Michael Castle (R-DE), a senior member of the House Committee on Financial Services. Christina handled financial services issues for the Congressman during consideration of the Dodd-Frank Act, and also worked on small business and judiciary issues. Christina earned a B.A. in Political Science from the University of Delaware and a M.A. in Political Science from American University.

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