Thursday, July 27, 2006
Boeing Will Refuse to Deduct $615 Million Settlement with Government; Grassley Slams DOJ Lawyers for Ignoring Tax Implications
We previously blogged (here and here) the controversy over the deductibility of Boeing's $615 million settlement with the federal government.. Yesterday, Boeing bailed and said it would not claim a deduction for the settlement:
"While the decision not to deduct the $615 million will be costly in the short run, it is an important long-term move to improve Boeing’s reputation and move the company in a new direction. Without question, the short-term impact of the tax issue is significant. However, the long-term value of Boeing’s reputation is even more significant. I feel strongly that the right thing for Boeing to do is not to seek tax deductibility for the settlement charges.
Senate Finance Committee Chair Charles Grassley issued a press release praising Boeing's decision but slamming the DOJ for ignoring the tax implications of the settlement:
“It’s good Boeing won’t seek a tax deduction for its $615 million settlement. That’s the right decision. However, Boeing’s lawyers believed the settlement was tax deductible. This tells me Department of Justice lawyers failed to take into account the settlement’s tax treatment and allowed Boeing’s lawyers to effectively negotiate a 35 percent discount. Any junior lawyer knows to look at a settlement’s tax treatment, yet Justice lawyers were asleep at the switch. That’s inexcusable. The Justice Department has to pay attention to the tax treatment in these big settlements.
Update: The WSJ Law Blog has more here.