The $787 million defamation settlement Fox News reached with Dominion Voting Systems this week may end up leaving the right-wing news giant with a bloody nose instead of the sucking chest wound that its legion of haters were rooting for.
Yes, it’s the largest defamation settlement ever paid out and yes, the discovery process exposed Fox’s top talent as snake oil salesmen — but the network is going to be able to claw back as much as $213 million of the settlement through tax write-offs, Lever News reported Tuesday.
Thanks to an arcane line in the tax code, Fox can deduct that settlement payment from its income taxes, according to a company spokesperson and tax experts consulted by The Lever. That’s because federal law allows taxpayers to write off many legal costs, providing that they are “ordinary and necessary” business expenses. The IRS has repeatedly affirmed that for major corporations, paying out settlements is just part of the cost of doing business.
In Fox’s case, that business involved ginning up false claims that the 2020 election was stolen from former President Donald Trump.
“If your business model is to tell lies so that you’ll get viewers and have lots of advertising revenues, then, odious though this business model may be, the tax system’s job is to tax you on the profits that you actually make from it,” Daniel Shaviro, a professor of tax law at NYU, told The Lever. “And those profits are indeed reduced when you are successfully sued by the victims of your malicious falsehoods.”
“I can confirm tax deductibility but not the amount,” said Fox’s chief communications officer Brian Nick.
By any measure, the settlement figure is massive; it’s roughly equivalent to two-thirds of Fox’s 2022 net income of $1.2 billion. But the company will save roughly one-third of the settlement cost on this year’s tax bill, not to mention the portion of the settlement that will be covered by insurance.
Investors seem to have noticed that the deal isn’t the knockout blow it’s being advertised as: Fox’s stock price has barely moved since the two-year legal battle ended on Tuesday.