Here’s why: Settlement payments are tax deductible if the company pays out of pocket. When you run a business, much of what you spend is considered a business expense. That includes the money you spend to defend the company in civil lawsuits that threaten to tarnish the company brand or otherwise harm its ability to make money in the future.
That means if Fox pays the full settlement — and is not reimbursed for it by any insurance coverage it may have for exactly these types of legal costs — it could reduce its federal tax liability by up to $165.38 million , Hellwig said. In addition, “Fox also may deduct their settlement payments for state and local income tax purposes,” Rosenthal noted.
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