Trial Lawyers Seeking Tax Break

Over 75 business associations, legal reform groups and others, in a letter to Treasury Secretary Timothy Geithner, expressed strong opposition to any administrative move that would unilaterally grant a tax deduction for lawyers’ loans to the plaintiffs they’re representing in civil lawsuits. This is the $1.6 billion tax break for trial lawyers that the American Association of Justice (AAJ) has failed to push through Congress.

AAJ is asking Treasury for guidance or tax interpretation that would grant what Congress refuses to grant. Leading members of Congress have objected, saying that the Executive Branch should not supplant Congress policy making.

Professional groups like the American Medical Association are alarmed (AMA letter), and business groups like the NAM protest the possibility of a huge tax break that would create an incentive for more litigation.

The letter said, a change in IRS policy to permit the deduction envisioned by the trial bar is totally unwarranted. According to the Congressional Joint Committee on Taxation, permitting this deduction would result in a $1.572 billion loss of revenue for the federal government over a ten-year period. ◆