Day on Torts reports that Sen. Arlen Specter (R-Pa.) has introduced two legislative tax measures "that, if passed and signed into law, would be good for those of us who do contingent fee work and for the clients who hire us." The first would allow attorneys to deduct as a necessary business expense "any expenses and court costs paid or incurred by an attorney the repayment of which is contingent on a recovery by judgment or settlement in the action to which such expenses and costs relate. Such deduction shall be allowed in the taxable year in which such expenses and costs are paid or incurred by the taxpayer." Current IRS practice allows the attorney to deduct such advances only when the litigation is resolved, not at the time the money was advanced. The second measure would allow plaintiffs to deduct, as an "above the line" deduction, contingent fees they pay their lawyers as part of a settlement.
Thanks so much, Sen. Specter