[Congressional Record Volume 161, Number 6 (Tuesday, January 13, 2015)]
[Senate]
[Pages S204-S205]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LEAHY:
  S. 169. A bill to amend the Internal Revenue Code of 1986 to disallow 
any deduction for punitive damages, and for other purposes; to the 
Committee on Finance.
  Mr. LEAHY. Mr. President, today I am introducing legislation that 
will close a tax loophole that allows companies to write off the 
punishment they receive for corporate wrongdoing. Under current law, a 
corporation or individual business owner may deduct the cost of court-
ordered punitive damages paid to victims as an ``ordinary'' business 
expense. For the victims of extreme corporate misconduct, there is 
nothing ordinary about this. It is simply wrong. This tax loophole 
allows corporations to wreak havoc and then write it off as a cost of 
doing business. That undermines the whole point of punitive damages.
  Punitive damage awards are designed to punish the wrongdoers and to 
correct dangerous or unfair practices. These awards are reserved for 
the most extreme and harmful misconduct. Sadly, our country's history 
is replete with examples of serious corporate misconduct that resulted 
in injury and death to American citizens, but through our civil justice 
system and the thoughtful deliberations of our Nations' juries, this 
misconduct is not only punishable by assessing punitive damages, it has 
led to broad changes to improve the safety and security of American 
consumers. Unfortunately, our current tax laws shield the worst 
corporate misconduct. The No Tax Write-Offs for Corporate Wrongdoers 
Act would change that by making a simple fix to our tax code.
  In 2010, the Deepwater Horizon drilling rig exploded and 11 Americans 
were killed in the worst oil spill in American history. That same year, 
an explosion in the Upper Big Branch Mine in West Virginia claimed the 
lives of 29 miners. In 2009 and 2010, Toyota recalled more than 10 
million vehicles because of a faulty acceleration system that has been 
linked to at least 31 accidents and 12 deaths, and recently admitted to 
misleading the public about these dangers. Let us also not forget 
Exxon's misconduct in 1989, which led to an ecological and human 
disaster that affects Alaskans even today. Vermonters and all Americans 
deserve to have companies such as these held accountable for their 
actions. Why should hard-working taxpayers subsidize corporations who 
deserve to be punished?
  In 1994, a jury awarded $5 billion in punitive damages against Exxon 
for its actions which caused the Valdez spill that devastated an entire 
region, the livelihoods of its people, and destroyed a way of life. The 
role of the jury is enshrined in our Constitution, and nothing is more 
fundamental to the American justice system than our trust in the 
judgment of those who serve on them. Rather than accept this reality, 
Exxon paid its cadre of lawyers to fight the jury's measure of 
accountability all the way to the Supreme Court. In 2008, after 14 
years of appeals, an activist majority on the Court invented a novel 
rule and held that in maritime cases, punitive damage awards could not 
exceed twice the amount of compensatory damages, reducing Exxon's 
punitive damages to $500 million. Adding insult to injury to the 
victims of the oil spill, Exxon was then able to use the federal tax 
code to write-off the punitive damages as an ``ordinary'' business 
expense. This is not how the system should work and it is long past 
time for Congress to fix it.
  I have previously supported legislation by Senator Whitehouse to 
overturn the Supreme Court's decision in Exxon, and I am disappointed 
that not a single Republican joined this commonsense effort. If we 
cannot get bipartisan support to ensure corporations pay the highest 
possible price for actions that cause serious harm to health and public 
safety, I hope we can at least agree that American taxpayers should not 
have to subsidize their misconduct once a jury has determined they 
should be punished.
  The Obama administration requested eliminating this tax deduction in 
its 2014 budget proposal. The Joint Committee on Taxation has estimated 
that ending this deduction loophole will result in increased revenues 
of $355 million over 10 years. Members who have devoted so much of 
their focus to reducing the Federal deficit should support my 
legislation. Anyone who cares about protecting consumers should agree 
that extreme corporate misconduct should not be treated in our tax code 
simply as a cost of doing business.
  Right now, the new Republican majority in Congress is pushing 
legislation to approve the Keystone XL Pipeline. Despite being billed 
as the safest pipeline in history, the existing Keystone pipeline has 
spilled 12 times in its first year of operation. This has a familiar 
ring: Before the Valdez spill in Alaska, Exxon executives told us their 
oil tankers were safe. I do not support Congress bypassing the 
environmental appeal process to fast-track further construction of the 
Keystone pipeline, which poses considerable safety and environmental 
risks. But anyone who does want this pipeline should at a minimum 
consider the communities and families who would be affected by its 
construction, and in the event of a spill, they should make sure 
taxpayers are not subsidizing the damage. This speaks to our basic 
notions of justice and fair play.
  I hope all Senators will join me to end tax write-offs for corporate 
wrongdoers. When companies can write off a

[[Page S205]]

significant portion of the financial impact of punitive damages, the 
incentives in our justice system that promote responsible business 
practices lose their force. Corporate misconduct should no longer be 
treated as a cost of doing business.
                                 ______