Legal News

The Talk of the Day: The Proposed Tax Break for the Trial Bar

By Ashby Jones

The legal-o-sphere is abuzz today with a report from Legal Newsline, a publication run by the U.S. Chamber of Commerce, that the plaintiffs’ bar is supporting a congressional bill that would allow attorneys to deduct fees and expenses up-front for filing contingency-fee lawsuits. Click here and here for the House and Senate bills, respectively.

The tax break for contingent-fee lawyers that would let them deduct expenses as made, rather than in the year of settling a suit. Estimates peg the cost of the deduction at $1.6 billion.

Not surprisingly, tort-reformers aren’t too happy about this. Writes Shook Hardy’s Victor Schwartz, the general counsel of the American Tort Reform Association:

Those who practice plaintiffs' lawyer work learn quickly that it is a business similar to other capital businesses. Capital is placed at risk and a judgment is made whether or not it will bring a profit. Today the costs of litigation act as a curb against marginal and frivolous litigation. This is what makes the plaintiffs' lawyers' tax proposal of such great practical importance. While one cannot calculate it mathematically, having the federal government bear 40% of the initial costs allows plaintiff's attorneys to take more cases with higher risks. The result to industries targeted by plaintiffs' lawyers will be staggering.

A spokesman for the trial lawyers’ trade group, the American Association of Justice declined to provide a statement.

The bills have bipartisan support. The Senate bill was introduced by Arlen Specter (D-Pa), and is co-sponsored by Senators Lindsay Graham (R-S.C.), Patrick Leahy (D-VT), Ron Wyden (D-OR) , Mike Crapo (R-ID), Mel Martinez (R-FL), and Mary Landrieu (D-LA).

Full post as published by Law Blog - WSJ.com on July 31, 2009 (boomark / email).