House committee calls on DOJ to investigate companies' opioid settlement tax benefits
Four companies that allegedly helped fuel the opioid epidemic recently agreed to pay about $26 billion to settle thousands of related lawsuits, but they also may use certain tax benefits for their settlement expenses, House Oversight Committee Chair Carolyn Maloney and colleagues recently wrote to Attorney General Merrick Garland and Treasury Secretary Janet Yellen.
Last March, the Oversight leaders questioned the companies — Cardinal Health, McKesson, AmerisourceBergen, and Johnson & Johnson — on reported plans to use a tax provision in the Coronavirus Aid, Relief, and Economic Security (CARES) Act to increase deductions for settlement costs related to their role in fueling the US opioid crisis.
“The Committee remains deeply concerned that these companies will be allowed to claim billions in tax benefits resulting from great harm to the American people,” Democrat Reps. Maloney (NY), Jimmy Gomez (CA), and Mark DeSaulnier (CA) wrote.
They also suggested that the Departments of Justice and Treasury should look into whether Cardinal Health, specifically, is improperly taking advantage of the CARES Act’s loss carryback provision.
The provision provides for companies to carry back any net operating losses from 2017 to 2021, to each of the five taxable years preceding the taxable year in which the loss arises.
Cardinal Health noted in its response last year to the committee, when questioned on the tax benefits, that “even if the CARES Act were not in place, and Cardinal Health did not have insurance coverage purchased through its wholly-owned insurance company, the applicable payments under the Settlement Framework still would be tax deductible as liabilities are fixed and payments are made.”
But others, like J&J and McKesson, made clear to the committee they have no plans to use the CARES Act to carry back net operating losses attributable to any potential opioid litigation-related losses.
“The Committee requests that your Departments examine any deduction McKesson Corporation, AmerisourceBergen, Johnson & Johnson, or Cardinal Health may claim based on their settlement expenses and whether Cardinal is improperly taking advantage of the CARES Act loss carryback provision. The Committee further requests that you brief Committee staff regarding your findings,” the letter notes.
More than 500,000 people in the US have died from the opioid epidemic since 1999, and more than 100,000 died last year alone.