Last month, the U.S. Court of Appeals for the First Circuit affirmed the award of a $50 million tax refund to Fresenius Medical Care Holdings, Inc. The court agreed with Fresenius that certain payments in settlement of alleged False Claims Act violations were tax-deductible. The case is Fresenius Medical Care Holdings, Inc. v. United States, No. 13-2144 (1st Cir. Aug. 13, 2014).Fresenius operates dialysis centers within the United States and abroad, and in the mid-1990s its predecessor company faced an array of FCA whistleblower suits and related government investigations. Fresenius eventually settled both criminal and civil matters with the Government, agreeing to pay $385,147,334 to resolve the civil matters.Fresenius claimed a tax refund based on the amount it paid to settle civil FCA claims. Civil FCA violations normally result in treble damages and a statutory penalty per false claim. Although the Government agreed that Fresenius could deduct an amount equal to single damages ($192,550,517) plus that amount owed to the whistleblowers ($65,800,555), Fresenius sued in the District of Massachusetts to seek a tax refund based on the remaining $126,796,262. A jury concluded that $95,000,000 of the remaining $126,796,262 was “compensatory” in nature and hence deductible, which resulted in a $50,420,512.34 tax… Read full this story
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