Here’s why:Settlement payments are tax deductible if the company pays out of pocket. The corporate income tax is also about dollars and cents, not about judging behavior that led to the business expense in the first place. “Our income tax measures income, not probity,” said business tax expert Steven Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center. In addition, “Fox also may deduct their settlement payments for state and local income tax purposes,” Rosenthal noted. If Fox pays for an insurance policy that it expects will reimburse it for its settlement costs, then it may not deduct the cost of the settlement payment.

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