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February 26, 2013 > Bill to close tax loophole

Bill to close tax loophole

Submitted By Jeff Barbosa

Assemblyman Bob Wieckowski (D-Fremont) introduced legislation on February 19, 2013 to prevent a tax loophole that allows companies to take a tax deduction when a court holds them liable for punitive damages.

"No corporation should receive a tax deduction after a court has found it liable for committing an egregious act," said Wieckowski, chairman of the Assembly Judiciary Committee. "The purpose of punitive damages is to punish the worst behavior by irresponsible corporations. This bill will make sure we don't give tax breaks for violating the law."

Currently, California's tax code allows businesses to take a tax deduction when a court holds them liable for punitive damages. This undermines the very purpose of penalizing companies who violated the law and have been proven by clear and convincing evidence in court to be in the wrong.

"You don't reward a child for bad behavior, so why should we reward the worst kind of wrongdoing?" Wieckowski asks. "Common sense says this practice must be eliminated."

A similar bill was introduced in the last session but failed to receive the necessary two-thirds vote for approval despite overwhelming support from Democrats.

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