The views set forth herein are the personal views of the authors and do not necessarily reflect those of the Firm.For 2017, the additional standard deduction amount for the aged or the blind is $1,250. To request reprint permission for any of our publications, please use our "Contact Us" form, which can be found on our website at The mailing of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship. The contents are intended for general information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, to be given or withheld at our discretion. Jones Day publications should not be construed as legal advice on any specific facts or circumstances. Johal, an associate in the Los Angeles Office, assisted in the preparation of this Alert. General email messages may be sent using our "Contact Us" form, which can be found at Joseph A. Even where plaintiffs will bear their own attorney's fees, requiring nondisclosure may affect their willingness to settle, or the terms of such settlement, to the extent such fees may have otherwise been deductible.įor further information, please contact your principal Firm representative or the lawyers listed below. Accordingly, until further guidance is issued, employers should take this into consideration when agreeing to pay a plaintiff's fees. Second: Does the loss of deductibility also apply to attorney's fees incurred by the plaintiff? The plain language of the provision-"attorney's fees related to such a settlement or payment"-appears to include fees incurred by both the defendant and plaintiff. This may enable employers to deduct portions of the settlement not allocable to the sexual harassment claims, and potentially a portion of any attorney's fees incurred in connection with such other claims. First: Are other claims covered by a settlement "related to sexual harassment or sexual abuse," thus making payment for those claims also nondeductible? Since a case may involve numerous legal claims, where appropriate, employers may consider allocating the payment between those claims pertaining to sexual harassment or abuse and any other claims. This new law leaves two primary questions unanswered for employers. The provision applies to amounts paid or incurred after December 22, 2017, and effectively requires employers to choose between nondisclosure and deductibility. Specifically, no deduction is allowed for "(1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or (2) attorney's fees related to such a settlement or payment." Section 13307 of the Tax Cuts and Jobs Act provides that no deduction is permitted for settlements subject to nondisclosure agreements and paid in connection with sexual harassment or abuse. The recently enacted tax reform bill includes a provision that significantly affects how employers settle sexual harassment claims.
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