Sending Office: Honorable Suzan K. DelBene
Cosponsor the Stop Tax Breaks for Sexual Misconduct Act (HR 4516)
Settlements paid to victims of sexual misconduct by powerful figures often are made in exchange for victims signing a non-disclosure agreement, which keeps perpetrators’ reputations intact, company names out of headlines, and ensures that future victims
have no idea about their history as predators.[i] A recent Washington Post article (“More
companies are buying insurance to cover executives who sexually harass employees”) noted that American corporations spent around $2.2 billion in 2016 on sexual misconduct insurance policies – billions of dollars on policies that make it easier to silence
victims that were tax-deductible. And sales of these policies are only increasing with news of harassment by high-profile public figures, while the non-disclosure agreements that accompany settlement payments ensure that nobody is held accountable. Meanwhile,
companies also get to deduct the cost of settlements, damages, and attorneys fees as regular business expenses, while victims who are given payouts must pay income taxes on any funds they receive as compensation for their trauma.
As Professor Peter Henning of Wayne State University Law School
recently observed, “Ending this tax break [for settlement payments and attorney’s fees] would make this kind of confidentiality agreement more costly for perpetrators and the companies that let them off the hook. That would give corporate accountants and
human resources departments a powerful incentive to root out the problem.” This legislation puts an end to taxpayer subsidies for hush money, and increases the cost of maintaining hostile work environments where sexual misconduct is addressed with cash rather
than accountability. Specifically, this bill would:
- Eliminate the ability of corporations to deduct the cost of sexual misconduct insurance premiums from their federal taxes.
- 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.
- Exclude from taxable income any amount received as damages or settlement in a case of sexual misconduct.
This important legislation will decrease perverse incentives for corporations to harbor and shield employees guilty of sexual misconduct, and increase incentives to be transparent, accountable, and proactive about maintaining significantly safer work environments.
Additionally, it will create parity and fairness for victims of sexual misconduct by treating them the same as victims of physical injury under the tax code.
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