A bill requiring government agencies to disclose how much companies would be able to claim in tax credits and other benefits when they reach settlements with enforcement agencies has passed a key committee.
The bipartisan legislation, known as the Truth in Settlements Act, is co-sponsored by Sen. Elizabeth Warren, D-Mass., and Tom Coburn, R-Okla. The bill was approved by the Senate Homeland Security and Governmental Affairs Committee on Wednesday.
It aims to increase public transparency around the financial settlements reached by federal agencies. Instead of simply announcing the total dollar amount, the agencies would be required to say how much of the settlement corporate wrongdoers would be able to deduct from their taxes.
When federal agencies settle cases, they often tout the dollar amount obtained from the offender, but in many cases that amount is misleading because of tax deductions and other credits built into the settlement that reduce the settlement's true value. Sometimes agreements are deemed confidential, with key details or even the fact that a settlement has been made at all being kept hidden from the public. The Truth in Settlements Act would require more accessible and detailed disclosures about these agreements to allow the public to hold regulators accountable for the true value of these deals.
“When government agencies reach settlements with companies that break the law, they should disclose the key terms of those deals to the public," Warren said in a statement Wednesday. “Today’s vote moves us one step closer to increased transparency and stronger accountability around government settlements. This bill will help shut down backroom deal-making and ensure that Congress, citizens and watchdog groups can hold regulatory agencies accountable for stronger and more effective enforcement to the law.”
Under the Truth in Settlements Act, any agency that issues a written public statement that references the amount to be paid under a settlement would be required to include explanations of how those payments are categorized for tax purposes and whether those payments may be offset by credits for particular conduct. Companies that settle with enforcement agencies would be required to disclose in their Securities and Exchange Commission filings whether they have deducted any or all of the dollar amounts of their settlements from their taxes; and federal agencies would be required to post basic information about settlements and provide copies of those agreements on their websites.
“Taxpayers deserve to know the settlement details corporations arrange with the government, and the best place for Congress to start is with policies that enhance transparency,” said Coburn. “Since agencies are not currently required to disclose the financial structure of government settlements, too often the true value of those settlements is not known because often companies are allowed to deduct part of the payment. Our bill gives taxpayers the transparency tools they need to access real information and numbers regarding enforcement settlements.”