Statement of U.S. PIRG Tax and Budget Advocate Dan Smith on the passage of the Truth and Settlements Act (S. 1898), introduced by Senators Warren (D-MA) and Coburn (R-OK), by the Homeland Security and Government Affairs Committee.
“U.S. PIRG applauds the Homeland Security and Government Affairs Committee for approving the bipartisan Truth in Settlements Act. Thanks to a loophole in the law, companies paying out-of-court settlements to federal agencies can often deduct part of the cost from their tax bill as an ordinary business expense. This important bipartisan legislation would take the critical step of requiring the terms of these deals to be made public.
“For JP Morgan, this loophole means an expected $3.85 billion tax windfall for its recent settlement related to toxic mortgages that contributed to the financial crisis. For BP’s settlement for its oil spill, the tax break was $10 billion.
“These agreements are signed in the name of the public and total tens of billions of dollars each year, but right now there is no requirement that agencies publicly disclose the true value of these deals. Taxpayers deserve to know if they’re footing part of the bill for a company’s wrongdoing.
“The Coburn-Warren bill would shine much needed light on settlement deals that are signed behind closed doors. Agencies would need to report on the true value of the settlement and would have to make key information available to the public online.
“An April poll released by the U.S. Public Interest Research Group Education Fund, and conducted by Lake Research Partners, found that substantial majorities across party lines overwhelmingly disapprove of settlement tax write-offs and want federal agencies to be more transparent about them.
“Now that this bill has cleared committee with a bipartisan vote Congress has no excuse not to enact it into law.”
A U.S. House counterpart bill (H.4324) has also been gathering bipartisan momentum, with four Republican and four Democratic cosponsors.