AB 458 would stop rewarding corporationsfor egregious violations of the law

Sacramento – Assemblymember Bob Wieckowski (D-Fremont) introduced legislation today to prevent a tax loophole that allows companies to take a tax deduction when a court holds them liable for punitive damages.

“No corporation should get a tax deduction after a court has found it liable for committing an egregious act,” said Wieckowski, chairman of the Assembly Judiciary Committee.  “The purpose of punitive damages is to punish the worst behavior by irresponsible corporations.  This bill will make sure we don’t give out tax breaks for violating the law.”

Currently, California’s tax code allows businesses to take a tax deduction when a court holds them liable for punitive damages.  Allowing punitive damage payments to be deducted on taxes undermines the very purpose of penalizing companies who committed egregious misconduct and have been proven by clear and convincing evidence in court to be in the wrong.

“You don’t reward a child for bad behavior,” Wieckowski said.  “Why should we reward the worst kind of wrongdoing?  Common sense says this practice must be eliminated.”

A similar bill was introduced in the last session, but failed to receive the necessary two-thirds vote for approval despite overwhelming support from Democrats.

Wieckowski represents the 25th Assembly District, which includes San Jose, Santa Clara, Milpitas, Fremont and Newark.

Contact: Jeff Barbosa, 916-319-2025