July 26,2006

Grassley: Despite Boeing Decision on Deductibility, Justice Department Must Do Better Job on Tax Piece of Settlements


To: Reporters and Editors
Re: Boeing’s government settlement, potential deductibility
Da: Wednesday, July 26, 2006

Sen. Chuck Grassley, chairman of the Committee on Finance, with jurisdiction over taxes,
earlier this month signed a letter from Sen. John McCain, also signed by Sen. John Warner,
expressing concern over whether the Boeing Company will be able to deduct any of its $615 million
settlement with the government over hiring and contracting manipulation. Today, the Boeing
Company announced it will not seek tax deductibility for the settlement, although the bulk of the
settlement is tax deductible. Grassley made the following comment on that announcement.

“It’s good Boeing won’t seek a tax deduction for its $615 million settlement. That’s the right
decision. However, Boeing’s lawyers believed the settlement was tax deductible. This tells me
Department of Justice lawyers failed to take into account the settlement’s tax treatment and allowed
Boeing’s lawyers to effectively negotiate a 35 percent discount. Any junior lawyer knows to look
at a settlement’s tax treatment, yet Justice lawyers were asleep at the switch. That’s inexcusable. The
Justice Department has to pay attention to the tax treatment in these big settlements. We can't depend
on having klieg lights from Congress for the right thing to happen. Justice should be doing it right
from the beginning. I want to commend Senator McCain for his leadership in the Boeing issue. I’m
glad we have this result, but we need the right result every time. For that to happen, the Justice
Department has to do a better job of paying attention to the tax consequences of settlements. In the
meantime, I’ll keep working to advance my legislation clarifying what is and isn’t deductible in