Revolving Door Sham: JPMorgan CFO Admits $7 Billion of DOJ Settlement is Tax-Deductible

[Jim Lane]

9. I don't agree with your analogy to individuals.

You write, "Similarly, if normal citizens pay parking tickets or late fees at the library, we can’t deduct them from our taxes, even if we negotiate over the fine."

One obvious difference is that these aren't business expenses in the sense of being related to income. In the corporate examples, when the company does something shady and thereby increases its profit, Uncle Sam declares himself in on the deal, and takes 35% of the extra revenue. It's hypocritical for the IRS to refuse to recognize the expenses that were incurred to make that extra profit. An individual's parking ticket or library fine, by contrast, isn't normally related to the income that the IRS is taxing.

I figured I'd be in the minority on DU on this one, but I believe in fairness in taxation -- even fairness to big corporations. The corporate income tax should be assessed against net income, after deducting the expenses that were involved in generating that income.

You're correct that it weakens the deterrent, but that factor should be taken into account by the government in the setting of the amount of the settlement in the first place. In general, I believe there's a tendency of government agencies to go for a "body count" by being too ready to agree to deals that generate favorable headlines, even if adopting a tougher negotiating posture with a corporate malefactor would have been more in the public interest.