Treasury tax break for lawyers bothers leaders

By Chris Dickerson and John O'Brien | Jul 15, 2010



WASHINGTON -- While some are reacting to news that trial lawyers may soon receive a tax break, the U.S. Department of the Treasury is not commenting.

A Treasury spokesperson said Wednesday that the department did not have a comment on a member of the nation's trial lawyer group, the American Association for Justice, revealing the Treasury's plan to order a tax break for lawyers working on contingency fee lawsuits.

Sources at an AAJ convention in Vancouver, Canada, told Legal Newsline that John Bowman, the Director of Federal Relations for the AAJ, said in response to a question from a state delegate regarding recruiting new members that an administrative order from the Treasury Department could come soon.

A message with the AAJ was not returned.

"If so, it's outrageous, using the taxpayers to subsidize speculative lawsuits to the tune of (an estimated) $1.6 billion," said Carter Wood, of the National Association of Manufacturing.

The tax break could be similar to proposed legislation that didn't make it through Congress last year. That proposal, sponsored by U.S. Sen. Arlen Specter, D-Pa., would have allowed attorneys to deduct fees and expenses up-front for filing contingency fee lawsuits.

"A revenue ruling or new guidance from Treasury would also represent yet more of the current Executive Branch's disregard for the policymaking branch of government, Congress," Wood added.

The president of the American Tort Reform Association called a tax break for lawyers "baffling."

"The Obama administration insists that it's determined to create jobs and help the private sector economy expand. But by forcing taxpayers to subsidize still more litigation, it would do the just the opposite," Sherman "Tiger" Joyce said Wednesday. "We can either create more jobs or more lawsuits."

In West Virginia, the president of the state Chamber of Commerce went off on the AAJ and the Obama administration.

"This is another gift from the lawsuit loving Obama administration to the already rich," Steve Roberts said. "This is Chicagoland politics at its worst and, if true, is just despicable. No wonder the public holds Obama in such low regard.

"Obama doesn't even act like he wants to have reasonable policies. It's time we called him and his supporters out."

Roberts called the administration's "hypocrisy" on this issue "astounding."

"The Obama administration and their adherents in Congress tax, regulate and penalize the businesses that hire Americans who need jobs and turn around and shovel money to their multi-millionaire political allies," he said. "A tax break for plaintiff's lawyers who sue people for a living is nothing short of welfare for the rich.

"This is such a slap in the face to honest, hardworking people who don't go to resorts in the Canadian Rockies to talk about getting tax breaks on their multi-million dollar incomes."

Richie Heath, executive director of West Virginia Citizens Against Lawsuit Abuse, agreed.

"Why on earth would we want to create additional incentives for filing job-killing lawsuits at a time when millions of Americans are looking for work," he said. "It's simply ridiculous to force taxpayers to subsidize the lawsuits of wealthy personal injury lawyers."

The Treasury Department cautioned the AAJ not to go public with the information yet, according to Bowman, sources also said.

"Writing off the costs each year would substantially boost their after-tax income and increase the attractiveness of contingency-fee cases as an investment, much as tax writeoffs on drilling expenses dramatically increase the odds of financial success in the oil and gas business," Daniel Fisher wrote in Forbes.

"The change would be poorly timed from a political standpoint, though: At the same time as legislators are trying to take away the lucrative carried-interest tax break from hedge-fund operators, Treasury would be giving it to another group of well-heeled and politically powerful professionals."

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