Sponsors (7)
The bill makes attorneys' fees for consumer-protection and SCRA claims deductible above the line to lower plaintiffs' net costs and improve access to justice, while increasing federal revenue loss and creating risks of uneven benefits and higher litigation costs passed to businesses and consumers.
Taxpayers who pay attorneys' fees to pursue consumer-protection claims can deduct those fees above the line, reducing their taxable income in the year paid.
Consumers pursuing fraud, lending, product-safety, and other consumer-protection claims—including low-income plaintiffs—face lower net legal costs, which may improve access to justice and make it easier to enforce rights.
Servicemembers and veterans who bring SCRA (Servicemembers Civil Relief Act) claims can deduct related legal costs, easing the financial burden of defending their rights.
All taxpayers face reduced federal revenue from expanding the above-the-line deduction, which could increase the deficit or force trade-offs in federal spending or taxes.
Higher-income plaintiffs who incur larger legal fees are likely to get a bigger tax benefit, so the provision may disproportionately advantage wealthier litigants.
Broad coverage of federal, state, and common-law consumer claims could increase litigation incentives, raising legal and compliance costs for businesses—especially small businesses—and potentially leading to higher prices for consumers.
Based on analysis of 2 sections of legislative text.
Permits an above-the-line deduction for attorney fees and court costs tied to covered consumer-protection judgments or settlements.
Introduced February 6, 2025 by Catherine Marie Cortez Masto · Last progress February 6, 2025
Creates an above-the-line tax deduction for attorney fees and court costs tied to a broad range of consumer-protection claims. The bill defines “consumer protection violation” to include a long list of named federal consumer statutes plus any federal, state, or local consumer-protection law or common-law consumer claim, and makes the deduction available for fees and costs paid in taxable years ending after enactment with respect to judgments or settlements in those years. The change reduces the tax burden on plaintiffs who recover damages (or otherwise obtain settlements) in covered consumer cases by allowing those legal expenses to be deducted before calculating adjusted gross income, which can increase after-tax recovery and may affect federal revenue and tax administration.