Following up on yesterday’s post on the GAO report on the deductibility of civil settlements: Senate Finance Committee Chair Sen. Grassley and Ranking Member Baucus announced that they will introduce legislation to clarify the deductibility of these settlement payments:

Senator Chuck Grassley, chairman of the Senate Finance Committee, and Senator Max Baucus, ranking member, questioned companies using civil settlements as tax deductions after the Government Accountability Office (GAO) released a study showing a number of companies using the settlements as deductions on tax returns. The two senators requested the study and will introduce legislation as early as today that would require settlement agreements to specify whether the payments are for non-deductible penalties and would limit deductions to the amounts paid for restitution or to come into compliance with the law. In addition, the legislation would require agencies to send information reports to the IRS so these deductions can be tracked and audited.