Senate Bill Seeks to Help Victims of Sexual Harassment
John Darer • May 28, 2018
Repeal Trump Tax Hike on Victims of Sexual Harassment Act of 2018 | S.2820
The treatment of attorneys fees paid in connection with settlement of lawsuits or claims for sexual harassment or sexual abuse has been in need of clarification since the moment the recent Tax Cuts and Jobs Act has been enacted. Here's what it says:
PL 115-97 SEC. 13307. DENIAL OF DEDUCTION FOR SETTLEMENTS SUBJECT TO NONDISCLOSURE AGREEMENTS PAID IN CONNECTION WITH SEXUAL HARASSMENT OR SEXUAL ABUSE.
(q) PAYMENTS RELATED TO SEXUAL HARASSMENT AND SEXUAL ABUSE.—No deduction shall be allowed under this chapter for—
- any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or
- attorney’s fees related to such a settlement or payment.
Apparent Tie to Non Disclosure Agreement? But...
At first glance it appears that the disallowance is tied to the use of a Nondisclosure Agreement, but it begs the question what about the deduction of attorney’s fees that don’t involve an NDA? One could argue that the Conference Committee Report suggests that the disallowance applies if such payments for sexual harassment or sexual abuse only if there is an NDA, but it is not clear since the disallowance for attorney’s fees is tied to part 2 “such settlement or payment”. It could be that all attorney’s fees related to a settlement or payment for sexual harassment or sexual abuse are disallowed.
Clarity Needed For Plaintiff Tax Treatment
Clearly the defendant’s attorney’s fees are disallowed, but what about the plaintiff’s expense if there is an NDA? If there is no exclusion for the plaintiff because the settlement was not on account of physical injuries or sickness [per I RC 104(a)(2)
], the plaintiff may be disallowed the deduction of any attorney’s fees since the provision does not explicitly refer only to defendant's /payor’s attorney’s fees. While this may not be the intent of the Tax Cut and Jobs Act, it may be a likely and highly negative impact on victims of sexual harassment/sexual abuse. This would result in the plaintiff paying tax on 100 percent of a settlement while up to 40 percent is paid to the attorney, not to mention the attorney's costs. Until there is a statutory change to this provision or IRS guidance to the contrary, the loss of the plaintiff’s deduction could complicate settlement negotiations.
Retroactive Amendment Sought in S.2820
Senate Bill 2820 introduced by Senator Robert Menendez (D-NJ) proposes that Section 162(q)(2) of the Internal Revenue Code of 1986 is amended by inserting ‘‘in the case of the taxpayer for whom a deduction is disallowed by reason of paragraph (1),’’ before ‘‘attorney’s fees’’. The bill was introduced May 10, 2018 and seeks an effective date of the day of enactment of the Tax Cut and Jobs Act.
What We Do
4structures.com LLC's John Darer
®is a Certified Financial Transitionist®, with a process and tools when working with people in transition and offers tax efficient solutions to help resolve sexual harassment lawsuits
Resources
The 4structures.com website is one of the most comprehensive structured settlement resources, particularly for those who want detailed, expert-level information, according to Google AI
Based on Grok's review of prominent sites as of August 2025, 4structures.com (including its associated blog at structuredsettlements.typepad.com) stands out as the most comprehensive. Run by structured settlement expert John Darer, it offers detailed guides, and specialized insights
Retained asset accounts for life insurance beneficaries, are temporary accounts that earn interest, give you time to breathe and give you time to figure it out.. Retained asset accounts are pay nterest from the date of death to date of settlement of the claim as a general practice,
How to avoid a "Knuckles Sandwich" when entering into settlement of claims or lawsuits involving taxable damages, or elements of taxable damages. What is the intent of the Payor? What happens if the intent of Payor is not clearly set forth in the settlement agreement?
Structured settlement annuity issuers have stood the test of time, which is crucial if you're depending on them to pay you stable income for a long time or the rest of your life or pay your beneficiaries . For Structured settlement annuities . Call John Darer at 888-325-8640
While rising yields have narrowed the gap for defendants in New York CPLR 50A and 50B projections, plaintiffs can still " fly inverted" and get plenty of "lift" when negotiating settlements by using savvy settlement experts
The cap rate on index linked structured settlement annuities is a limit set by the insurance company on the maximum interest rate that can be credited to the annuity based on the performance of the underlying index that also helps provide the downside prtection..
Do your financial resources give you enough road, or will the road run out before you do? A structured settlement annuity helps mitigate the risk of outliving your savings, no matter how long you live. A structured settlement can inlcude one or more customized payment streams and types.
USAA Life Insurance Company, an A++ rated insurance company, issues structured settlement annuities with 1%, 2% and 3% COLAs. USAA Life structured settlements are exceptionally compatitive on lifetime benefit payments with long duration certain periods for ages under 35.
Owners of highly appreciated NY businesses or NY real estate may benefit from a structured installment sale tax deferral program as an alternative to a 1031 exchange. MetLife's structured installment sale program is now available in NY and in all 50 states. Call 888-325-8640 for more info
