The Business of Class Actions and Recent Tax Developments

Attorneys involved in class actions, collective actions, enforcement actions, and other matters where distributions are made to a large number of recipients need an issue-spotting level of understanding of the tax rules governing attorney fee taxation, the Foreign Account Tax Compliance Act (FATCA), information return reporting, the deduction of case costs, and the special tax rules governing certain types of recovery. The past 24 months have witnessed changes in some of these tax rules. Adding to the complexity encountered in staying current with these changes, the Tax Cuts and Jobs Act (TCJA), Pub. L. No. 115-97, enacted in December 2017, contained the most sweeping federal tax law changes in more than 30 years. The TCJA added layers of new complexity for many taxpayers, attorneys among them.