Of the $13 billion JP Morgan settlement struck in late 2013, only $2 billion was said to be nondeductible. The DOJ doesn’t always disclose the terms of settlements either. But that could change. The proposed Truth in Settlements Act (S. 1898) would require agencies to report after-tax settlement values. Another bill, S. 1654, would restrict tax deductibility and require agencies to spell out the tax status of settlements.

A poll released by the U.S. PIRG Education Fund says most people disapprove of deductible settlements. BP might fuel such sentiments. Federal law prohibits a deduction of government fines or penalties. But companies often deduct ‘compensatory penalties,’ a maneuver affirmed in a recent Circuit Court ruling. U.S. PIRG has also created a fact sheet on Wall Street settlement tax deductions.

It is worth noting that BP has paid considerable amounts, and deducted them. BP wrote off the cost of its $32 billion cleanup effort after the spill, costing American taxpayers roughly $10 billion. However, the Justice Department reached a $4 billion criminal settlement with BP over its role in the deaths of 11 workers on the oil rig when it exploded. That $4 billion was explicitly made nondeductible.

For alerts to future tax articles, follow me on Forbes. You can reach me at Wood@WoodLLP.com. This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.

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