Confidential Settlements of Sexual Harassment Claims are No Longer Tax Deductible

In response to the recent wave of sexual harassment allegations and the #MeToo movement, the 2017 Tax Cuts and Jobs Act includes a provision some call the "Harvey Weinstein tax." Specifically, the law amends the Internal Revenue Code to prohibit a business from deducting the costs of a settlement payment (including attorneys' fees) for a sexual harassment claim, if the settlement agreement contains a nondisclosure (confidentiality) provision. New Section 162(q) was added to the Internal Revenue Code and provides that no deduction shall be 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) attorneys' fees related to such a settlement or payment." This provision applies to all such settlements entered into or paid after December 22, 2017, the date President Trump signed the bill into law. [More]