Will the plaintiff's bar soon see a long desired break from the IRS? Several news reports believe, yes a tax write-off will soon be available for the up-front expenses often incurred in contingency suits.
According to Forbes, a ruling from the Treasury Department on the issue could come at any time. Plaintiffs attorneys who take contingency cases have complained they must eat the costs of the out-of-pocket expenses such as witness and filing fees as incurred, and only get to write off expenses against any fee they obtain at the resolution of the case. Forbes reports that writing off the costs each year would "substantially boost their after-tax income" and make a contingency-fee case a more attractive investment for attorneys. This could be good news for not just attorneys, but also less affluent plaintiffs who need to rely on a contingency contract to afford representation.
Forbes likens the expense write-offs to the tax write-offs on drilling expenses that bump up the odds of financial success for the oil and gas industry. And yet, this is not a politically correct time to be raking in the tax breaks. Currently, Congress may try to take away the lucrative 'carried-interest' tax break from hedge-fund operators. To allow another group of less than popular professionals to garner a new benefit from the deeply in debt federal government won't play all that well.
According to a 2009 analysis by defense lawyers Shook Hardy & Bacon, the Joint Tax Committee estimated the 10-year cost of the write-off at $1.6 billion. The defense bar will no doubt view the break as a subsidy for contingency cases. Forbes fired a small final shot here, noting this may be the only subsidy corporate America does not like.