The Internal Revenue Service ("IRS") recently released a field attorney advice memorandum stating that the amount a company paid to the United States to disgorge profits under a consent decree with FDA is not considered a non-deductible fine or similar penalty for tax purposes. The consent decree was entered to enjoin the taxpayer pharmaceutical company from marketing drugs that FDA alleged were adulterated under federal statutes. IRS reasoned that although the evidence of FDA's intent in imposing the disgorgement was unclear, the "disgorgement was not a non-deductible fine or similar penalty" because, on balance, the evidence suggests that FDA did not intend for such payment to be punitive.
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