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New tax law's consequences for sexual harassment victims

A lesser-known amendment related to tax deductions for businesses could very well have devastating, unintended consequences on victims of workplace sexual harassment and abuse.

By Tanvir H. Rahman | Updated on January 18, 2018
In one interpretation, victims of workplace sexual misconduct who settle their claims subject to an NDA would be prohibited from deducting the portion of their settlement allocated to attorney fees, but would have to pay taxes on the entire amount of their recovery. (Photo: Shutterstock)

A lesser-known amendment buried in the newly revised federal tax code related to tax deductions for businesses could very well have devastating, unintended consequences on victims of workplace sexual harassment and abuse. Specifically, §162(q), while originally intended to end a business’s ability to deduct sexual misconduct settlements conditioned on non-disclosure agreements (NDAs), states, in its present form, that “no deduction shall be allowed under this chapter for—(1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a non-disclosure agreement, or (2) attorneys’ fees related to such a settlement or payment.”

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