Lawmakers push to end 'hush money' deduction in tax fight

Loophole targeted on sexual harassment lawsuits

By SCOTT MCLEAN , CNN
Headline Goes Here Copyright 2017 CNN

(CNN) - During a week where Congress is examining its own policies regarding sexual harassment settlements, one lawmaker wants to use Republicans' plans to overhaul the US tax code to eliminate a loophole for corporations to deduct expenses related to such settlements.

Currently, the IRS allows companies to deduct business expenses that are "both ordinary and necessary." Rep. Ken Buck, a Colorado Republican, says that law is ambiguous, meaning the American taxpayer could effectively be subsidizing the cost of covering up illegal behavior, and he's found at least one Democrat who thinks this is an issue as well.

"It is just unbelievable to me that we would have taxpayers subsidizing rapists to give hush money to victims of crime," he said.

Buck is not pointing to specific examples but says the potential is there -- so he wrote an amendment to the House tax bill to close that loophole.

His amendment didn't make it into the House tax bill that cleared the chamber Thursday, but a similar amendment did make it into the Senate Finance Committee's version of the bill that advanced to the floor.

Sen. Bob Menendez, a New Jersey Democrat, included such an amendment during the Senate Finance Committee's markup process. It would ban companies from deducting legal fees or settlements related to sexual harassment or abuse -- but only "if such payments are subject to a nondisclosure agreement."

Buck says that doesn't go far enough.

"If we said, you can write this off as long as you don't have a nondisclosure agreement, then I just don't think Americans will tolerate that," he said.

Menendez's spokesman Juan Pachon said the amendment was limited to settlements with nondisclosure agreements in order to discourage them.

Such agreements make it harder for other victims to come forward, said Pachon: "Senator Menendez believes it's wrong for corporations who fail to protect their employees from sexual harassment to be able to write it off as an 'ordinary business expense.' Nothing about sexual harassment should be ordinary," he said.

If the amendment is not included in the final legislation signed by the President, Buck promised to introduce tougher stand-alone legislation on the topic.

A growing chorus of lawmakers are calling for Republican candidate Roy Moore to drop out of the Senate race in Alabama, after he was accused of sexual abuse involving teenagers when he was in his 30s. On Thursday, Sen. Al Franken, a Minnesota Democrat, apologized for a 2006 incident after a woman said he groped her and kissed her without her consent before he was a senator.

Asked about Moore, Buck said, "Roy Moore knows what he did and if he did what he has been alleged to have done, he should not be running for the United States Senate."

CORRECTION: An earlier version of this story incorrectly said the Menendez amendment didn't make it into the bill that passed the Senate Finance Committee. This story has been updated to reflect that the bill does include it.

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