Friday, July 31, 2009
$1.6b Tax Break for Trial Lawyers
A pending bill in Congress would permit plaintiffs' lawyers to immediately deduct loans to clients to cover litigation expenses (rather than at the conclusion of the litigation), at a cost of $1.6 billion
- A Bill to Amend the Internal Revenue Code of 1986 to Allow the Deduction of Attorney-Advanced Expenses and Court Costs in Contingency Fee Cases (S.437; H,R. 2519)
- Jonathan Adler (The Volokh Conspiracy), A Tax Break for Trial Lawyers
- Walter Olson (Point of Law), AAJ Looking to Quietly Pass Plaintiff Lawyer Tax Break
- Chris Rizo (Legal Newsline), Lobbyist: AAJ Looking to Quietly Pass Plaintiff Lawyer Tax Break
- Victor E. Schwartz & Christopher E. Appel (Legal Opinion Letter), Federal Government Bailout for Trial Lawyers
- Carter Wood (Shop Floor), A $1.6 Billion Tax Break for Lawyers
https://taxprof.typepad.com/taxprof_blog/2009/07/16b-tax-break-.html
$1.6 B tax break? That cannot be right. Under current law, lawyers carry costs and deduct them if the case is unsuccessful and they cannot be recovered from the client. If the costs are paid by the client the are no tax consequences to the lawyer (because they are not income.) Under the proposed new law, the costs would be deductible but when recovered from the client the recovery of those costs would be taxable. Thus, the issue is one of timing of deductions / declaration of income and nothing more. Assuming an investment rate of 5% and an average 2 year carrying cost the total case expense outlay would have to be in excess of $30B to have an annual cost of $1.6B. There is no way the case advances are that high.
Posted by: John A. Day | Jul 31, 2009 7:22:21 PM