are settlement fees deductible

(f) Fines and Penalties - No deduction shall be allowed under subsection (a) for any fine or similar penalty paid to a government for the violation of any law.

So if the payment is made to customers, I imagine it would be deductible. But not if the payment is made to the US, any state, or any foreign government. I did find an interesting article at

What if the payment is a coupon? Like $20 of your next order, expiring in June/30/2012. One would imagine the coupon reduces the revenue, so the revenue will just be reduced, and there is no writing off of the settlement payment regardless of whether the company is on cash or accrual basis.