Boeing Won't Seek Tax Deduction Over Fraud Settlement

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July 26, 2006 12:23 PM

Boeing announced today it won't seek a tax deduction on a $615 million settlement it reached with the government over allegations of criminal misconduct.  Boeing had agreed to pay the settlement to avoid being charged for alleged hiring and contracting manipulation.

The U.S. Department of Justice had been criticized for agreeing to the settlement without clarifying if Boeing would be able to deduct the amount -- a potential savings of about $200 million. 

Sen. Charles Grassley (R-IA), Chairman of the Senate Finance Committee, said Boeing made "the right decision" by choosing not to deduct, but added that the Justice Department needs to pay greater attention to the tax consequences of such large settlements. 

According to Sen. Grassley, "Any junior lawyer knows to look at a settlement's tax treatment, yet Justice lawyers were asleep at the switch."

Today's announcement comes after Sen. Grassley and two colleagues, Sen. John McCain (R-AZ) and Sen. John Warner (R-VA),  wrote in a letter to Attorney General Alberto Gonzalez earlier this month that it would be "unacceptable" if Boeing was able to write off the costs of the settlement, "thereby leaving the American taxpayer to effectively subsidize its misconduct."   

The letter also warned that "hearings may be warranted" if the final settlement was executed before the tax issue was resolved.