Tax Bill Would Curb Breaks For Sexual Abuse Settlements

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The sexual misconduct allegations against the former Fox News host Bill O’Reilly and the Hollywood producer Harvey Weinstein — and the confidential settlements arising from those accusations — have prompted a provision in the final tax bill that aims to stem the use of nondisclosure agreements.

Senator Robert Menendez, a Democrat from New Jersey, proposed the amendment last month. It says any settlement, payout or lawyer’s fees related to sexual harassment or sexual abuse could not be deducted as a business expense if such payments were subject to a nondisclosure agreement.

“I think most Americans would be outraged to know that they are subsidizing sexual predators in the tax code,” he said in an emailed statement.

But the proposed changes may not deter some companies and businesses from seeking confidentiality.

“This is a nudge, not a hammer,” Daniel Hemel, an assistant professor at the University of Chicago Law School and an expert in tax policy, said in a phone interview on Saturday.

Publicly known sexual harassment settlements involving Mr. O’Reilly — who is said to have used nondisclosure agreements — have totaled about $45 million, including a $32 million payout that he paid personally.

Weinstein, whose abuse of women was exposed by The New York Times in October, also has used confidentiality agreements. The Times reported that Mr. Weinstein has said he struck at least eight to 12 settlements with women claiming mistreatment.

Under the tax bill spearheaded by Republicans, a hypothetical company that paid a $10 million sexual abuse settlement would not be able to take a deduction on that amount if the payout had a nondisclosure agreement attached to it.

In the absence of a confidentiality agreement, however, the new corporate tax rate would allow the company to save $2.1 million in taxes, making its out-of-pocket cost $7.9 million.

For a business that generates billions in revenue, like the parent company of Fox News, a nondisclosure agreement can have far more value than tax savings.

“The new rules are very well-intentioned, but the impact is likely to only be symbolic,” Gordon Klein, a lawyer, certified public accountant and faculty member at the University of California, Los Angeles’s Anderson School of Management, said in a phone interview on Saturday. “The reason for that is companies cherish nondisclosure agreements because they significantly help protect the company’s reputation and protect them from follow-on lawsuits or additional lawsuits.”

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