The eye-popping $787.5 million settlement between Fox Corp. and Dominion Voting Systems regarding defamation claims is significant, but the final cost to the media firm is probably far lower.
On Tuesday, Fox reached a settlement with Dominion over claims that Fox News had falsely accused the organization of manipulating its voting machines in 2020 in favor of former president Donald Trump.
Fox Can Subtract Dominion Settlement From Income Taxes
As of December 2022, Fox had approximately $4 billion in cash, and MoffettNathanson analyst Robert Fishman predicts the corporation will pay the punishment this quarter.
There are ways for Fox to offset some of the cost, particularly through insurance and the use of Tax deductions may be made, but it’s unclear how much the case will ultimately cost the business.
The Dominion settlement may be written off by Fox as a necessary business expense for tax purposes.
Fox’s top communications officer has confirmed that the reimbursement is tax-deductible.
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The Tax Benefits and Insurance Coverage
Substantial settlements are routinely taken into account by huge firms to offset some of the costs, but it is challenging to calculate exactly how much profit they actually realize because settlement amounts are typically confidential.
Contributions that are considered to be reparation or compensation may be tax deductible, however, payments made to the government or under its direction are typically not.
After the tax write-off, according to Robert Willens, a tax professor at Columbia University School of Commerce, Fox will incur expenses totaling nearly $590 million.
Twenty companies reported withholding some or all of their settlement payments from 34 settlements totaling more than $1 billion, according to a 2005 study by the Government Accountability Office.
Major banks like JPMorgan Chase and Bank of America took money out of their settlements for claims relating to the 2008 financial crisis.
Also, if Fox has insurance, it will presumably cover a portion of the damages.
A large media corporation, such as Fox, may have coverage ranging from $100 million to $500 million, including media liability insurance and other types of insurance, according to Chad Milton, a partner at Media Risk Consultants.
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