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Senators Call on IRS to Prohibit Opioid Settlement Deductions

APR. 16, 2021

Senators Call on IRS to Prohibit Opioid Settlement Deductions

DATED APR. 16, 2021
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April 16, 2021

The Honorable Charles Rettig
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224

Dear Commissioner Rettig:

We write to urge the Internal Revenue Service to use the full extent of its authority to challenge any abusive tax deductions claimed by opioid companies for expenses related to legal settlements regarding these companies' role in fueling the opioid crisis.

Recent reporting indicates that four companies involved in the multi-district opioid litigation collectively plan to claim billions of dollars in tax deductions for expenses related to a pending $26 billion settlement with state and local governments,1 which sued these companies for their role in fueling the opioid epidemic. Similarly, in 2019, a judge ordered one of these companies to pay $572 million to the State of Oklahoma for misleading marketing of its opioid products.2 Based on this reporting, we are concerned that opioid wholesalers and drug companies may mischaracterize legal settlement expenses in order to claim tax deductions under tax code section 162(f), which allows the deduction of restitution payments.

In January 2021, the IRS published TD 9946, final regulations regarding the deductibility of legal settlement expenses under section 162(f). We strongly encourage the IRS to fully enforce the tax code by challenging any erroneous interpretations of these recent regulations that opioid companies may use in an attempt to claim tax deductions for legal settlement expenses.

We thank you for your attention to this important issue.

Sincerely,

Margaret Wood Hassan
United States Senator

Ron Wyden
United States Senator

Brian Schatz
United States Senator

Chris Van Hollen
United States Senator

Tammy Baldwin
United States Senator

Sheldon Whitehouse
United States Senator

Angus S. King, Jr.
United States Senator

Debbie Stabenow
United States Senator

Mark R. Warner
United States Senator

Catherine Cortez Masto
United States Senator

Jack Reed
United States Senator

Robert Menendez
United States Senator

FOOTNOTES

1“Drug companies seek billion-dollar tax deductions from opioid settlement.” Washington Post. February 12, 2021. https://www.washingtonpost.com/business/2021/02/12/opioid-settlement-tax-refund/?arc404=true

2“Johnson & Johnson Ordered to Pay $572 Million in Landmark Opioid Trial,” New York Times, August 26, 2019, https://www.nytimes.com/2019/08/26/health/oklahoma-opioids-johnson-and-johnson.html

END FOOTNOTES

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