Historically, taxpayers who made settlement payments to the government or relator under False Claims Act actions could offset those often considerable costs by deducting all or part of the payment for federal income tax purposes.
But the Tax Cuts and Jobs Act, enacted in December, dramatically shifted the tax treatment of such payments, resulting in the potential loss of valuable tax benefits. Now more than ever, companies must carefully consider the tax treatment of these payments when negotiating False Claims Act settlements with the DOJ.
