Fox News and its parent company have agreed to pay a $787 million settlement to Dominion, marking the largest media defamation payout in U.S. history. However, what you may not know is that this settlement payment could result in a massive tax break for Fox Corporation.
According to a Lever review, Fox could deduct the entire $787 million settlement payment from its income taxes, thanks to an arcane line in the tax code. The tax code allows taxpayers to write off many legal costs, provided that they are “ordinary and necessary” business expenses. The IRS has repeatedly affirmed that for major corporations, paying out settlements is just part of the cost of doing business. In the case of settlements between private entities, the entity making the payment can deduct the cost entirely, while the recipient pays corporate income taxes on it.
As Fox Corporation reported $1.2 billion in net income in 2022, the $787 million Dominion settlement is equivalent to about two-thirds of the company’s profits last year. However, Fox could save hundreds of millions of dollars in taxes on the settlement payment. The company reported paying an effective income tax rate of 27 percent in 2022, a combination of federal and New York corporate taxes. If Fox can write off the full settlement payment to Dominion, it could amount to an estimated $213 million in tax savings for the company.
It is important to note that if any of Fox’s settlement payments are covered by insurance, Fox could not write off that portion of the payment. However, the company would then be able to deduct any subsequent higher premiums triggered by an insurance payout.
🚨NEWS: Fox News says it can claim a tax write-off for its defamation settlement with Dominion.
The deduction would lower the company’s tax rate, effectively forcing taxpayers to provide up to a $200 million subsidy to the company for its election lies. https://t.co/IH0fiLiFo7
— David Sirota (@davidsirota) April 19, 2023
While the Dominion settlement has spared Fox from a lengthy public defamation trial or a full public reckoning for its election lies, it has been noted that the company may be able to benefit from a tax break due to its false claims about the 2020 election. It is also worth noting that this tax break is not unique to Fox Corporation and is available to any corporation that pays a settlement.