Tax Savings from the Dominion Settlement

Fox News could be entitled to a tax write-off of as much as $213 million, thanks to its $787.5 million settlement with Dominion Voting Systems on Tuesday, according to one report.

The network agreed to the payment to avoid a $1.6 billion defamation lawsuit going to trial, after broadcasting false claims suggesting Dominion Voting Systems helped steal the 2020 presidential election from Donald Trump using fraudulent voting machines.

Trump returned to Fox News in March, following an absence of several months, amid reports of tensions between the former president and the right-leaning network. During his absence Fox News gave heavy coverage to Florida Governor Ron DeSantis, Trump’s most credible rival for the 2024 Republican presidential nomination.

According to a report by The Lever, a progressive news outlet, the Dominion Voting settlement could allow Fox News to cut its tax bill by up to $213 million, as it slashed the network’s income.

Tax experts told The Lever legal costs can be considered “ordinary and necessary” business expenses by the IRS, allowing the company to make income tax deductions. Speaking to the outlet Brian Nick, chief communications officer of the Fox Corporation, said: “I can confirm tax deductibility but not the amount.”

Newsweek has independently approached Fox News for comment by email.

Speaking to Newsweek Armine Alajian, a certified public accountant and founder of Los Angeles-based firm the Alajian Group, confirmed legal costs can be treated as a legitimate business expense.

She said: “The fact that legal expenses are tax deductible for businesses is no secret, so Fox’s ability to write off hundreds of millions of dollars from their settlement payout isn’t surprising. If you’re a business owner and it’s reasonable and necessary under the IRS’s standards for your business to incur legal expenses, they are tax deductible.

“Defending your business, patents, trademarks or negotiating contracts are just a few examples of reasonable and necessary business legal expenses. As with most tax write-offs, there are limitations, which in this case include employment discrimination and whistleblower cases.

“On the flip side, Dominion’s lawsuit settlement will be considered income on their taxes. Of course, their legal expenses are also able to be written off.”

During an interview with The Lever, Professor Daniel Shaviro, a tax law expert at New York University, commented: “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.

“And those profits are indeed reduced when you are successfully sued by the victims of your malicious falsehoods.”

Tuesday’s settlement was announced just after the jury had been officially selected, with presiding Delaware Superior Court Judge Eric Davis describing it as the “best lawyering” he’d ever seen.

John Poulos, CEO of Dominion Voting, welcomed the settlement in a statement sent to Newsweek.

He said: “Fox has admitted to telling lies about Dominion that caused enormous damage to my company, our employees and our customers. Nothing can ever make up for that.

“Truthful reporting in the media is essential to our democracy. Dominion, our employees and our partners are grateful to the court for allowing the process for the truth to come out. I cannot thank the election officials that we serve enough. Without them, there is no democracy, and they work tirelessly to that end and deserve much better.”

Fox News commented: “We are pleased to have reached a settlement of our dispute with Dominion Voting Systems. We acknowledge the Court’s rulings finding certain claims about Dominion to be false. This settlement reflects FOX’s continued commitment to the highest journalistic standards.”

Former federal prosecutor Glenn Kirschner said the settlement left him “feeling a little deflated,” as he was hoping for a trial “in which all of Fox’s intentional democracy-busting lies would be exposed.”

Update 4/21/23 3:48 a.m. ET: This story has been updated with comment from certified public accountant Armine Alajian.