[Congressional Record Volume 163, Number 183 (Thursday, November 9, 2017)]
[Senate]
[Page S7158]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. LEAHY (for himself, Mr. Blumenthal, Mr. Reed, Mrs. 
        Gillibrand, and Ms. Hassan):
  S. 2115. 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, as Republicans consider tax proposals to 
disproportionately benefit corporations and the wealthy, they 
simultaneously fail to address revenue-draining loopholes that compel 
hardworking taxpayers to subsidize corporate misconduct. Today, I am 
introducing commonsense legislation--the ``No Tax Write-Offs for 
Corporate Wrongdoers Act''--to prevent the worst corporate actors from 
writing off their wrongdoing as simply the cost of doing business. This 
idea is commonsense. This idea is straightforward. This idea should be 
bipartisan.
  Today's tax code allows corporations to deduct the cost of court-
ordered punitive damages as an ``ordinary'' business expense. Courts 
reserve punitive damages for only the most egregious and reckless 
misconduct--misconduct that usually causes great harm to peoples' 
lives. For victims who have suffered at the hands of the worst 
corporate bad actors, there is nothing ``ordinary'' about this 
loophole. Punitive damage awards are designed to punish wrongdoers for 
the reprehensible harm they cause--to provide a deterrence to 
misconduct. By giving corporations a deduction specifically for their 
wrongdoing, our tax code winks and nods at future wrongdoers who know 
that they can simply write off the damages they owe for the damage they 
cause.
  This is not a theoretical problem. In 1994, when the Exxon Valdez 
spilled 11 million gallons of oil in the Prince William Sound, 
devastating Alaska's southern coast, it was eventually slapped with 
punitive damages of $500 million. Exxon turned around and exploited 
this tax loophole to write off those punitive damages as an 
``ordinary'' business expense--saving the company millions of dollars 
that could have--and should have--added to government revenues. In 
2011, two Montana teenagers died in a car crash caused by a steering 
wheel defect in the Hyundai model they were driving--a defect that 
Hyundai knew about and recklessly ignored for over a decade. Although a 
judge eventually ordered Hyundai to pay $73 million in punitive 
damages, Hyundai can lawfully write those damages off as a business 
expense. This is just wrong.
  The No Tax Write-Offs for Corporate Wrongdoing Act is simple and 
straightforward, and would end this offensive loophole once and for 
all. My bill would amend the tax code to prevent the deduction of any 
amount ``paid or incurred for punitive damages in connection with any 
judgment in, or settlement, any action between private parties.'' Aside 
from bringing our tax code in line with our most basic notions of 
justice and fair play, my bill would save American taxpayers a 
significant amount of money. In 2016, the Joint Committee on Taxation 
estimated that ending this punitive damages loophole would increase our 
government revenues by nearly $415 million over 10 years.
  The Senate will be talking a lot about tax reform in the coming 
weeks. The Senate majority will bend over backwards--they already are--
to argue how important it is that we dramatically lower tax rates to 
make our tax system more favorable to large corporations. Should we not 
also hold these same corporations accountable when they poison our 
environment and harm Americans? Legislation that leaves such an 
egregious loophole in place while giving companies massive tax cuts is 
not tax reform. It is a corporate tax giveaway.
  It should shock the conscience to know that our law effectively 
compels hardworking taxpayers to subsidize the recklessness and bad 
behavior of the worst corporate actors. This bill would change this 
unacceptable status-quo. I thank Senators Blumenthal, Reed, Gillibrand, 
and Hassan for cosponsoring this legislation. I urge all Senators--of 
all political ideologies--to support the No Tax Write-Offs for 
Corporate Wrongdoing Act. Protecting our constituents from corporate 
misconduct is not a political or partisan issue. It is our job.

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