Last October,
According to the agreement, Marsh cannot use insurance to foot the $850 million bill. The company, which did not admit any wrongdoing, had set aside $232 million to pay settlement costs and said it would take a $618 million charge against fourth-quarter earnings, which it will announce on March 1.
But the caveat that allows Marsh to claim a healthy tax break on the $850 million is that it is money allotted towards restitution. Penalties and fines are generally not tax-deductible, but restitution, or disgorgement of profits to clients, can often be claimed as a deductible business expense, according to tax experts.
The exact amount that can be deducted from taxes depends on the company's tax rate and the amount of settlement that qualifies for a deduction. With a 30% tax rate and three-quarters of the settlement qualifying for a deduction, for instance, Marsh could cut its tax bill by $191 million. Several firms that were embroiled in the Wall Street research scandal and the mutual fund scandals used similar tax strategies to reduce their headline settlements.