Qui Tam

IRS Addresses Deductibility of Payments by Defendants to Settle False Claims Act Cases

By Finch McCranie, Esq.

In our former life as lawyers defending False Claims Act cases, our defendant clients had to consider whether the payments made to settle qui tam cases under the False Claims Act were deductible for tax purposes, and to what extent.

The IRS recently issued a paper on the subject: whether a defendant's payment to the Department of Justice to resolve False Claims Act allegations is "deductible in its entirety as a section 162(a) ordinary and necessary business expense, or includes non-deductible penalty amounts under section 162(f)."

This paper, LMSB-4-0908-045, is reproduced below:

Full post as published by Whistleblower Lawyer Blog on October 24, 2008 (boomark / email).