[blindlaw] Civil rights tax relief legislation introduced, ABA Washington Letter, August 2009

[Nightingale, Noel]

Thought some on this list might find this of interest.

Link:
http://www.abanet.org/poladv/wl/09aug/#no5

Text:
Civil rights tax relief legislation introduced

Sens. Jeff Bingaman (D-.N.M.) and Susan Collins (R-Maine) and Reps. John Lewis (D-Ga.) and F. James Sensenbrenner Jr. (R-Wis.) reintroduced bipartisan legislation June 25 that would address excessive and unfair tax treatment of settlements and awards in employment rights cases.

Since 1996, non-economic damages recovered in employment discrimination and other employment and civil rights cases have been taxable, penalizing victims of discrimination under all federal, state and local laws providing for the enforcement of civil rights and regulating employment relations. In addition, lump-sum settlements or awards that compensate for lost back pay over a period of years are taxable at the rate of the year of receipt, which creates a higher tax burden than if the money had been earned in the normal course of employment. In contrast, the Internal Revenue Service does not tax non-economic damages received as a result of personal injury.

The proposed Civil Rights Tax Relief Act (CRTRA), S. 1360 and H.R. 3035, would amend the Internal Revenue Code to exclude noneconomic damages from gross income and permit income-averaging for back pay received in a lump sum. The provisions would put employment discrimination plaintiffs on a more equal footing with plaintiffs in personal injury cases by removing the current differences in the tax treatment between the two groups.

According to the ABA, the CRTRA restores the pre-1996 tax treatment of non-economic damages in employment discrimination cases, and victims of discrimination, employers and the administration of justice will all benefit from the legislation. The association and other supporters, including the National Employment Lawyers Association, maintain that the legislation will significantly reduce the costs of employment and civil rights cases.

Congress addressed another portion of civil rights tax relief in 2004, when the American Jobs Creation Act included provisions eliminating double taxation of attorneys' fees in employment discrimination, civil rights and other cases. The provisions, which were part of the Civil Rights Tax Relief Act proposed during the 108th Congress, allow plaintiffs an above-the line deduction for attorneys' fees and costs paid by or on behalf of the plaintiff in specific employment and discrimination cases, and preclude such payments from being subject to the Alternative Minimum Tax or the 12 percent floor on itemized deductions.

No action has been scheduled on the bills.