A provision in the new tax law greatly expands the scope of the disallowance of deductions for fines and penalties paid to government agencies. The new law disallows a tax deduction for any payment made to a government entity where the payment was made in relation to a violation of law or the investigation of a violation. Furthermore, it will disallow a deduction for payments made to third parties at the direction of a government agency. This deduction disallowance will make it costlier for a company to investigate and settle claims of violation of laws and regulations brought by federal, state, or local agencies or a foreign government. It will potentially touch a wide array of controversies that involve claims or actions alleging the violation of laws, including securities, employment, environmental, Foreign Corrupt Practice Act, white collar, whistleblower, healthcare, insurance, gaming, government contracts, or any other regulated industry. Under a literal reading of the statute, it could also apply to qui tam actions brought by private parties under a false claims (whistleblower) or private attorney general act. Any proposed settlement or consent order should be analyzed to determine whether it can be structured to limit the application of this new tax law.