Another eye-opening story from Chris Rizo at the Chamber's Legal NewsLine: the litigation lobby is quietly preparing to push through a $1.6 billion (with a "b") tax break for contingent-fee lawyers that would let them deduct expenses as made, rather than in the year of settling a suit. AAJ lobbyist Linda Lipsen says Sens. Harry Reid and Max Baucus and Reps. Nancy Pelosi and Charles Rangel are among those on board, as well as "some Republicans", but "the problem is there is not a tax vehicle yet," -- "You cannot have a stand alone bill to help lawyers ... so we have to tuck it into something."
More: Carter at ShopFloor has the bill numbers -- S. 437, with GOP co-sponsors Crapo, Martinez, and Graham, and H.R. 2519 -- and also links to a Victor Schwartz/Chris Appel paper (PDF) for the Washington Legal Foundation. And welcome readers from Jonathan Adler's post at Volokh Conspiracy, which has spurred a considerable discussion in comments of what tax treatment for these outlays would in fact accord with the tax principles applied to other economic activity. Says one commenter:
Treating these pseudo-loans as business expenses the moment they're made is effectively an admission that the lawyer doesn't expect to be repaid. If a bank loans you $1 million to buy a house, you don't see them lobbying to make it a tax-deductible business expense, because it's a bona fide loan they expect to get back.
[Addressing another commenter:] ... the fact that the loans are tax-deductible if they are not repaid is not indicative of some special tax treatment that already exists; it simply means that they can be written off like any bad debt. But you don't get to write off bad debt until you actually know it's bad!
Yet more: Tax Lawyer's Blog ("'Tuck it into something' is an Orwellian phrase designed to mislead the public. What it means is that certain congressmen want to pass this law to placate the trial lawyer lobby, but they don't want the electorate to know they're doing it."); Paul Caron, TaxProf (collecting links); San Francisco Examiner "Beltway Confidential"; James Taranto/WSJ "Best of the Web".