Though Fox News reached an agreement with Dominion Voting Systems earlier this year to pay one of the largest media settlements in history over the outlet’s repeated lies regarding the 2020 election, the corporation may be able to soften the blow — to the tune of a $200 million tax break, reporters found earlier this year. Now, one Senate Democrat is trying to change that.
Sen. Sheldon Whitehouse (D-Rhode Island) filed a bill on Wednesday that would specifically bar large corporations from being able to take an income tax deduction from certain defamation payments. The legislation is seemingly aimed directly at barring Fox from being able to diminish the impact of its settlement payment over actions that likely had a huge impact on eroding American democracy.
In April, The Lever reported that Fox will be able to deduct its $787 million settlement with Dominion due to an arcane provision allowing taxpayers to write off “ordinary and necessary” business expenses.
If Fox deducted that amount from its taxable income from its reported $1.2 billion in profits in 2022 — or about two-thirds of its profits — this would amount to $213 million in savings for the company, reporters estimate. Fox confirmed to The Lever that it can claim this tax deduction.
Lawmakers have condemned the tax loophole, saying that the public should not have to suffer even further from Fox’s lies.
“Taxpayers shouldn’t have to foot the bill for multi-billion-dollar companies like Fox News when they get caught selling malicious lies that are damaging our democracy,” Whitehouse said in a statement. “There is nothing ‘ordinary and necessary’ about lying to the American people.”
The Denying Expenditures for False Accusations with Malicious Effect (DEFAME) Act would apply to defamation payments worth over $500 million from companies that have made over $10 billion in revenue, and could cover defamations that require proof of “actual malice,” as the Dominion lawsuit was centered around.
The bill comes as companion legislation to a similar House Bill, filed earlier this month by Rep. Brendan Boyle (D-Pennsylvania), called the “No Taxpayer Bailout for Defamation Act.” The bill would bar Fox and other taxpayers from taking a tax write-off for defamation if they have admitted guilt, which Fox seemed to have done in part when it issued a statement about the case that recognized “the Court’s rulings finding certain claims about Dominion to be false.”
“It is outrageous that taxpayers essentially subsidize large defamation suits, especially when the party acknowledges fault,” Boyle told The Lever.
Both bills would apply to the year 2023, meaning that Fox’s settlement, from April, would be included. They may also apply to future defamation settlements like voting machine company Smartmatic’s ongoing defamation suit against Fox, in which the company is suing for at least $2.7 billion — far greater than the $1.6 billion sought by Dominion.
Though the amount of the settlement is significant, many commentators have noted that it’s not enough to right the wrongs wrought by Fox’s election lies. That there was a settlement at all means that Fox wasn’t forced to acknowledge wrongdoing to viewers, which would have had a more widespread impact, or face the full blow of a court ruling against the company. The fact that the company will likely be able to save $200 million in taxes because of it is yet another twist of the knife.
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