S&C Article in New York Law Journal Addresses Deductibility of Sex Harassment Settlements

March 5, 2018
Julie Jordan and Christina Andersen co-authored a New York Law Journal article titled “New Tax Law Limits Deductibility of Harassment Settlements: Where Will the Law of Unintended Consequences Take Us?” The article examines Internal Revenue Code Section 162(q), which was added to the Code by the new tax law and eliminates the deductibility of amounts paid in connection with settlement of sexual harassment and abuse claims if the settlement agreement requires nondisclosure on the part of the employee.  The article identifies several questions left unanswered by the new provision and observes that, although the intention of Section 162(q) was to reduce secrecy surrounding sex harassment settlements, it may have consequences that undermine that goal, such as incentivizing claimants to bring sex discrimination instead of sex harassment claims in order to avoid the tax consequences of the latter, among other things.