The Potential Impact Of Taxing Nondisclosure Agreements

By Allan King and William Hays Weissman (January 19, 2018, 10:26 AM EST) -- In response to alleged incidents of sexual harassment by high-profile celebrities, and to discourage the secrecy that typically surrounds settlement of sexual harassment claims, the recent tax amendments no longer permit corporations to deduct these payments as corporate expenses if the settlement is subject to a nondisclosure agreement. The reasoning presumably is that taxing settlements that include nondisclosure agreements, but permitting companies to expense settlements that permit disclosure, will encourage the latter and discourage the former. This article contends that the these provisions will have a negligible effect on the number of agreements that are subject to disclosure, will reduce the value of settlements paid to victims of sexual harassment, and that the increased taxes that result will be paid largely by victims of harassment....

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