The Boeing Co. won't look to take a tax deduction on a $615 million settlement it paid to settle federal ethics charges.

The aerospace company made the deal in May to end a three-year investigation and avoid criminal charges over allegations that it had improperly acquired proprietary documents from rival Lockheed Martin, as well as illegally recruited a top Air Force weapons buyer who was overseeing Boeing contracts.

The company's chief executive W. James McNerney Jr. said that the decision to take a $160 million loss in its second quarter, instead of seeking the tax deduction, was all part of Boeing's attempts to put a recently checkered past behind itself. McNerney appeared before the Senate Armed Services Committee earlier this week to answer questions about the company's behavior.

Shortly after the government settlement was announced, Boeing had run into loud criticism from several senators -- including Senate Finance Chairman Charles Grassley, R-Iowa; John Warner, R-Va.; and John McCain, R-Ariz.

In a statement, Grassley praised Boeing's decision, but said that he would push for better legislation to clarify what part of a settlement is deductible.

"The Justice Department has to pay attention to the tax treatment in these big," he said, later adding, "I'm glad we have this result, but we need the right result every time. For that to happen, the Justice Department has to do a better job of paying attention to the tax consequences of settlements."

As a general rule, compensatory damages are deductible while penalties are not. The Justice Department's policy in settling fraud investigations is to remain tax neutral and defer issues to the Internal Revenue Service.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access