Last week saw a major move in the New York clergy sex abuse scandal. The Catholic Diocese of Buffalo paid $17.5 million to settle with more than 100 victims of clergy sexual abuse.
That number may grow. While 17 people rejected the settlement offers, which range from $2,000 to $650,000, three offers totaling $425,000 are still up in the air. In addition, the Buffalo Diocese has not yet paid $60,000 to one plaintiff. In the end, the payout could reach more than $18 million.
While nothing can take back these despicable acts that were committed over the course of decades, the plaintiffs who have come forward are amplifying an important movement against sexual abuse in our country.
Unfortunately, as The Buffalo News noted, the Independent Reconciliation and Compensation Program might actually be a bargain for the Buffalo Diocese. In other cities, dioceses have paid far more to settle claims brought through litigation. Even the Buffalo Diocese settled a single abuse claim for $1.5 million brought in federal court in 2016. That’s a staggering difference from $650,000, the largest compensation award offer this week. (Incidentally, the plaintiff offered $650,000 was one of the 17 people who rejected offers by the Diocese.)
That’s not all that might be undesirable about the recent settlements. The Harvey Weinstein tax included in the newest tax bill could further minimize those payouts come tax time.
In court cases involving sexual abuse, companies and people used to legally take tax deductions on settlements and related attorney fees, because they counted as business expenses. But changes applied in last year’s new tax lawnow deny deductions in confidential sexual abuse settlements. The rule applies to both lawyer fees and settlement payments.
More specifically, Section 162(q) of the tax code says:
(q) PAYMENTS RELATED TO SEXUAL HARASSMENT AND SEXUAL ABUSE. — No deduction shall be allowed under this chapter for — (1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or (2) attorney’s fees related to such a settlement or payment.”
If there is a non-disclosure agreement involved in this situation with the Buffalo Diocese, plaintiffs who receive a monetary recovery will not be able to deduct attorney fees. That means they will pay taxes on the FULL settlement amount before attorney fees are taken. That could leave them with substantially less money than their original offer. As we saw in the case of the U.S. gymnasts versus Larry Nassar, this tax on a settlement is just adding insult to injury to victims of sexual abuse.
Furthermore, in this and other instances of abuse within Catholic Dioceses, is it really the organization that is paying? As The Buffalo News article mentions, the money for their victim compensation fund actually comes from parishioners and their church contributions. We’re interested in hearing how active church members feel about this. Please feel free to comment below.
A West Point graduate where he served as captain and military aviator, John Bair continues his commitment to our country through his efforts within the settlement planning industry. He has represented families of victims lost in the Flight 3407 crash, offered pro bono services to the families of 9/11 victims and drafted the first consumer protection bill for plaintiffs (H.R. 3699).