No Tax Write-offs for Corporate Punitive Damages
New rules prevent companies from deducting punitive damages paid for wrongdoing from their taxes. This means businesses cannot reduce their tax burden by offsetting these penalties, aiming to increase their accountability. If an insurer reimburses a company for such damages, that amount will be considered taxable income.
Key points
Companies can no longer deduct punitive damages paid for wrongdoing from their taxes.
Money received from an insurer to cover punitive damages will be treated as taxable income for the company.
These changes apply to damages paid on or after the law's enactment date.
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