In acknowledgment of recent sexual harassment allegations and subsequent confidential settlements, Congress added a new section to the Internal Revenue Code as part of the Tax Cuts and Jobs Act. It prohibits employers from deducting costs related to sexual assault and sexual harassment settlements that are subject to nondisclosure agreements.
While motivation for this new provision was a well-intentioned nod to the #MeToo movement, it may have unforeseen consequences.
The problematic provision
Section 13307 of the act states:
PAYMENTS RELATED TO SEXUAL HARASSMENT AND SEXUAL ABUSE.—No deduction shall be allowed under this chapter for—
(1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or
(2) attorney’s fees related to such a settlement or payment.
Before this provision was enacted, the law permitted tax deductions f...(register to read more)
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