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Dorsey & Whitney - Employers Beware: Tax Law Change Eliminates Tax Deductions Relating to Certain Settlements

January 17, 2018View for printing

The #MeToo movement has had far-reaching implications and appears to have influenced the new federal tax law. The legislation contains a provision that has received little attention but that may have serious, unintended consequences for employers.

New Internal Revenue Code Section 162(q) will require employers whose settlements of sexual harassment claims include nondisclosure provisions to navigate carefully to preserve the deductibility of settlement related payments.

Although transparency has been a hallmark of the #MeToo movement, this provision may prove challenging for employers and employees who wish to maintain the confidentiality of certain settlements.

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