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Sexual Misconduct Scandals Prompt Change to Tax Bill

— December 20, 2017

A host of sexual misconduct scandals made clear over the past two years has prompted an apparent revision to the final rendition of a tax bill.

Senator Robert Menendez, a Democrat from New Jersey, proposed the amendment in November. According to The New York Times, his add-on carries a heavy consequence for businesses seeking to protect sexual predators.

The amendment stipulates that any settlement, payout or lawyers’ fees stemming from a sexual harassment or abuse claim won’t be tax-deductible as business expenses if the award is subject to a nondisclosure agreement.

“I think most Americans would be outraged to know that they are subsidizing sexual predators in the tax code,” said Menendez in an e-mailed statement.

But some experts interviewed by the Times say the proposal isn’t much of an incentive for companies to change.

Harvey Weinstein used confidential settlements to cover his tracks for years. Image via Reuters.

“This is a nudge, not a hammer,” said Daniel Hemel, assistant professor at the University of Chicago Law School, on Sunday.

Scandals resulting from confidentiality agreements have become commonplace news articles since the beginning of the year.

Former Fox News anchor Bill O’Reilly was forced out of his position with the agency in spring, after The New York Times ran a feature story on his workplace abuses. Between Fox and O’Reilly himself, tens of millions of dollars were paid to women propositioned or blackmailed by the talk-show host, all covered up under the veil of confidentiality agreements.

And Weinstein, also exposed by the Times, had used confidentiality agreements to shield himself from public persecution at least eight or nine times. Numerous actresses, past and present, accused Weinstein of trying to force himself upon them in exchange for roles and favorable casting. Most recently, Salma Hayek claims to have been verbally abused and forced to participate in Frida’s nude scene after rejecting a proposition from Weinstein.

But even a change to tax law would likely protect the likes of O’Reilly and Weinstein.

As noted by the Times, a nondisclosure agreement protecting important and influential personalities can be more beneficial for a company than damaging its public reputation.

“The new rules are very well-intentioned, but the impact is likely to only be symbolic,” said lawyer Gordon Klein and legal faculty at UCLA. “The reason for that is companies cherish nondisclosure agreements because they significantly help protect the company’s reputation and protect them from follow-on lawsuits or additional lawsuits.”

Nevertheless, Menendez’s amendment was one of a few Democrat ideas to be written into the Republican-dominated attempt at tax reform.

“I think the reason, in all honesty, why there was no pushback was because it was a revenue generator,” said Tricia Enright, Menendez’s press secretary. “They determined that it would be seen on the plus-side of the ledger.”


New York Times

Tax bill bans people from deducting confidential sexual-misconduct settlements

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