Fox Corp.’s $787.5 million settlement with Dominion Voting Systems over defamation fees is eye-popping, however the final price to the media firm is prone to be a lot decrease.
On Tuesday, Fox settled with Dominion over fees that Fox News baselessly accused the corporate of rigging its voting machines in opposition to former President Donald Trump in 2020. It was the most-watched media libel case in many years.
Fox had about $4 billion of money readily available as of December 2022, and MoffettNathanson analyst Robert Fishman expects the corporate to pay the settlement in the course of the present quarter.
How a lot the lawsuit will truly find yourself costing Fox is unclear as a result of there are methods it might probably defray a few of the expense, primarily by way of insurance coverage and the usage of tax deductions.
Fox can deduct the Dominion settlement from its earnings taxes as an expense mandatory for the price of doing enterprise. Fox Chief Communications Officer Brian Nick has confirmed the deductibility of the settlement.
Big firms typically deduct giant settlements to assist offset a few of the price, however since settlement quantities are often confidential, it’s tough to pin down precisely how a lot they profit. Payments which might be seen as restitution or compensation may be deducted, whereas funds made to the federal government or on the path of a authorities are often not deductible.
Robert Willens, a tax professor on the Columbia University School of Business, estimates that after the tax write-off, Fox will incur about three-fourths of the settlement quantity, about $590 million.
“The key is that if the payments are being made to private parties and not at the behest of the government then you can pretty much conclude without any fear of contradiction that the payment will be deductible,” he stated.
A examine by the Government Accountability Office in 2005 discovered that of 34 settlements totaling over $1 billion, 20 firms reported deducting some portion or all of their settlement funds. Big banks comparable to Bank of America and JPMorgan Chase reportedly additionally deducted parts of their settlements of fees tied to the monetary disaster of 2008.
Also, if Fox is insured, insurance coverage is prone to cowl a few of the settlement. Chad Milton, a associate at Media Risk Consultants, stated a big media firm comparable to Fox might have wherever between $100 million to $500 million in protection, together with media legal responsibility insurance coverage and different sorts of insurance coverage.
“It’s not hard to stack up $100 million but as you go higher than that, it gets harder and harder,” Milton stated.
Usually, there’s a certain quantity a media firm has to pay, which could possibly be within the hundreds of thousands, earlier than insurance coverage kicks in. However, the deductible incudes legal professional charges, which in a high-profile case like Fox-Dominion could possibly be tens of hundreds of thousands of {dollars} or greater, so the deductible could possibly be swallowed up simply by legal professional charges.
Source: www.bostonherald.com”