February 01, 2014

ABA applauds introduction of civil justice tax fairness legislation

The ABA expressed support this month for bipartisan legislation that would promote tax fairness in the treatment of civil rights and employment cases by excluding non-economic damages from gross income and eliminating the taxation for lump-sum recoveries at artificially high rates.

“Current tax laws penalize victims of discrimination under all federal, state and local laws that provide for the enforcement of civil rights or regulate the employment relationship,” ABA Governmental Affairs Director Thomas M. Susman wrote Feb. 3 to the Senate and House sponsors of the legislation.

He explained that, unlike victims of personal physical injury, victims who prevail on civil rights and employment-related claims must pay taxes on non-economic damages and are required to pay taxes on potentially many years of income in one year when they receive lump sum payment settlements.

S. 1224 − introduced by Sens. Ben Cardin (D-Md.) and Susan Collins (R-Maine) − and H.R. 2509 − introduced by Reps. John Lewis (D-Ga.), Robert C. “Bobby” Scott (D-Va.), Aaron Schock (R-Ill.) and Jim Sensenbrenner (R-Wis.) − address this discrimination.

The legislation, known as the Civil Justice Tax Fairness Act, would treat non-economic damages received by plaintiffs in discrimination cases in the same manner as comparable damages in personal injury cases and allow income averaging for discrimination victims who receive settlements or awards of several years of front or back pay in one year.

Other organizations supporting the legislation include the National Employment Lawyers Association, the Association of Corporate Counsel, the Leadership Conference on Civil and Human Rights, and AARP.  

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