But even if Hyundai is eventually forced to pay the full amount of the damages, the punishment could be substantially reduced through a tax loophole that permits the company to save millions of dollars by deducting any court-ordered punitive damages as an ordinary business expense. The result, critics say, is that taxpayers are in effect subsidizing corporate misconduct.
What’s terrible about this isn’t that companies are allowed to claim the fines they pay for malfeasance are an ordinary business expense. What’s terrible is that it’s true.
Update: I misspoke, as a commenter points out. A “fine” — that is, a penalty you pay to the government — is not deductible. What may be deductible are punitive damages, paid to people you injured or whose river you despoiled. Prepare your return accordingly!