IRC 162 : Sexual Harassment Payout Deduction Not Allowed ?

Sexual harassment payouts will be more painful for the people or organisation who commits or at lease accept the same indirectly by opting for the settlement with the alleger. The just passed The Tax Cuts & Jobs Act law has modified section 162 of the Internal Revenue Code that allows general business expense deduction to provide that under certain circumstances sexual harrassmentpayout or settlement amount can not be deducted as business expense by employres or business entities.

Change in IRC 162

As  we know section 162 provides many exceptions to the rule that “there shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business,”. For example, section 162(c) clearly prohibits any deduction of kickbacks or bribes that  constitutes illegal payments or, if the payment is to an official or employee of a foreign government

Sexual Harassment Payout Allowed Except if You Desire Anonymity

This new law will take away the benefit of non-disclosure from an organization or business entity if it wants to claim the deduction for settlement payouts.  Neither the settlement payment nor even the legal fees paid to the attorney who provides services for such a settlement is allowed to be deducted at the time of computation of business profit.

Thus , business or employers can still enjoy deduction under IRC 162, if they are ready to face public scrutiny on account of disclosure of settlement and all things related to such a settlement .