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Deduction of Attorney-Advanced Expenses Position
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he Industrial Minerals Association – North America (IMA-NA) opposes legislation to amend the Internal Revenue Code of 1986, to allow the deduction of attorney-advanced expenses and court costs in contingency fee cases.  The legislation seeks to stimulate the American tort system; a system that often encourages frivolous lawsuits at the profound expense of the American people.  This legislation represents back-door funding, estimated at $1.57 billion over 10 years, for trial lawyers.  The bills would allow as a deduction any expenses and court costs paid or incurred by an attorney, the repayment of which is contingent on a recovery by judgment or settlement, in the action to which such expenses and costs relate.  Such deductions would be allowed in the taxable year in which such expenses and costs are paid or incurred.

The normal case evaluation process that a plaintiff’s lawyer must make in order to determine whether a case is worth bringing forward, serves as a gatekeeper for the American judiciary system.  This includes assessment as to the likelihood of success and potential award for damages, balanced against the ultimate costs of prosecuting the case.  
This process is necessary because it helps reduce the flow of cases into an already over-burdened court system.  Cases having a low likelihood of success or limited award potential are less likely to be pursued.  By subsidizing the costs a plaintiff’s lawyer must pay, the process becomes skewed in favor of promoting frivolous litigation.  Proponents of these bills have stated that "This bill should encourage lawyers to represent individuals who may not be able to afford to pay an attorney or pay these costs.”  If a case is well-founded, it will be pursued regardless of the financial status of the client.   What is the real purpose of this legislation?    

The legislation is clearly an attempt to benefit the already thriving business of frivolous lawsuits that have served to dramatically alter the prospects of successfully operating businesses in the United States.  Are there not more significant priorities on which to spend $1.57 billion?

If this legislation were signed into law, the American taxpayer would accept up to an estimated 40% of the initial risk that should be borne by the attorney bringing the case.  What interest do the American people have in accepting risk on behalf of personal injury lawyers?

Many businesses in America, which provide valuable products and services and which do not depend on predatory lawsuits for their livelihood, would also value a proposition in which their initial risk is minimized by up to 40%.  Why are personal injury attorneys being placed in a special class of business?  Is their service, often framed as a public service, really of such value to the American people as to deserve this special treatment?
The American Tort Reform Association states that "Aggressive personal injury lawyers target certain professions, industries, and individual companies as profit centers.  They systematically recruit clients who may never have suffered a real illness or injury and use scare tactics, combined with the promise of awards, to bring these people into massive class action suits…This leads many companies to settle questionable lawsuits just to stay out of court.”  Does the broken U.S. tort system really need additional stimulus?  Are there not more significant priorities on which to spend $1.57 billion?

IMA-NA is a trade association created to advance the interests of North American companies that extract or process minerals used throughout the manufacturing and agricultural industries.  IMA-NA stands ready to participate constructively in the important discussion regarding whether to allow the deduction of attorney-advanced expenses and court costs in contingency fee cases.