Republicans Move to Clarify Tax Provision on Sexual Harassment Claims

U.S. Senate Republicans on Thursday sought to correct a section of President Donald Trump’s tax overhaul that threatened to prevent sexual harassment victims from claiming a tax deduction for the legal costs they incur while pursuing their cases.

In a letter to Treasury Secretary Steven Mnuchin dated Aug. 16, all 14 Republican members of the Senate Finance Committee said they wanted to clarify Congress’ intent on three separate tax provisions as the administration implements the Republican tax bill that Trump signed into law last December.

The sprawling legislation, which Republicans rushed to enact over universal opposition from Democrats, contains a number of poorly worded sections that would ordinarily be corrected by new legislation.

Republicans say they intend to introduce a technical corrections bill. But the prospects for a legislative fix are clouded by ongoing partisan gridlock in Congress, raising the possibility of wide-ranging unintended consequences.

The Trump administration is implementing the new law at a time when allegations of sexual harassment against dozens of high-profile men in media, entertainment, business and politics, including in Congress, have led to a wave of lawsuits and settlements.

The law does not allow tax deductions on sexual harassment settlement payments, including associated legal fees, if the settlement is subject to a nondisclosure agreement.

But the lawmakers said the code could also be interpreted as prohibiting the recipients of settlement payments from deducting the cost of their legal fees.

“Congressional intent was that these attorney’s fees would not be subject to this rule,” the senators told Mnuchin.

Led by Senate Finance Chairman Orrin Hatch, the Republicans also sought to clarify tax provisions related to property depreciation and net operating losses.

Without formal corrective action by both the Senate and House of Representatives, policymakers have limited scope to interpret legislative language on their own.

(Reporting by David Morgan Editing by Leslie Adler