The 2017 changes to the tax code in Section 162(q) made it appear as if plaintiffs could be denied a deduction of their attorney fees related to their sexual harassment claim, if made pursuant to settlement under a confidentiality agreement.
Recently the IRS provided an answer to this question and in two sentences said "no". Plaintiffs do not lose the deduction.
Employers, however, may not deduct attorneys fees related to the settlement under new Section 162(q), unless the plaintiff requests the confidentiality provisions. Unsurprisingly, this makes employers tend to ask plaintiffs to request the confidentiality provision as a condition to settlement. But practitioners are still grateful that some plaintiff tax uncertainty is now resolved.