Sponsors (7)
The bill lowers the after-cost price of bringing consumer- and SCRA-related legal claims—improving access to justice for many plaintiffs—at the expense of reduced federal revenue and a likely increase in litigation incentives that may disproportionately benefit wealthier plaintiffs and raise costs for businesses and consumers.
Consumers and other taxpayers who pay attorneys' fees for consumer-protection and related claims can deduct those fees above the line, lowering their taxable income in the year paid and reducing the net cost of bringing fraud, lending, and product-safety claims—improving access to justice for many plaintiffs (including low-income individuals).
Servicemembers, military personnel, and veterans who bring claims under the Servicemembers Civil Relief Act can deduct SCRA-related legal costs, easing the financial burden of enforcing their rights.
All taxpayers could bear higher federal deficits or face trade-offs in spending or taxes because allowing above-the-line deductions for these legal fees will reduce federal tax revenue.
Broadly enabling deductions for a wide range of state, local, and common-law consumer claims may increase litigation incentives, leading to more lawsuits, higher compliance/defense costs for businesses (especially small businesses), and potential price increases passed on to consumers.
The tax benefit may disproportionately favor higher-income plaintiffs who incur larger legal fees, giving a larger monetary advantage to those with greater resources rather than primarily helping the poorest claimants.
Based on analysis of 2 sections of legislative text.
Allows attorney fees and court costs from covered consumer-protection claims to be deducted above-the-line by defining "consumer protection violation" in the tax code.
Official title: Amend the Internal Revenue Code of 1986 to allow an above-the-line deduction for attorney fees and costs in connection with consumer claim awards.
Introduced February 6, 2025 by Catherine Marie Cortez Masto · Last progress February 6, 2025
Expands the federal tax deduction so that attorney fees and court costs tied to successful consumer-protection claims count as an above-the-line deduction. It does this by adding a definition of “consumer protection violation” to the Internal Revenue Code that lists many federal consumer statutes and broadly covers other federal, state, local, and common-law consumer claims; the change applies to fees and costs paid in taxable years ending after enactment for judgments or settlements in those years.