"This Civil Rights Tax Fairness Act is appropriately titled," said Senator Collins. "Fairness is at the root of this legislation. Indeed, it is only fair that we change an anomaly in our tax law that discriminates against those who successfully bring civil rights actions."
The bill grew out of the story of Cynthia Spina, a Chicago police officer, who suffered years of sexual harassment at work – lewd comments, hang-up calls, and slashed tires. When she sued the Department, she was left with a debt of $99,000, not because she lost the case – she won it! – but because the IRS taxes awards that aren't based on "physical injuries or physical sickness."
Specifically, the legislation would restore the pre-1996 tax exclusion for non-physical injury damages of discrimination victims; allow back-pay awards to be averaged over the period of time they are designed to compensate victims, so that lump sum awards do not place the victim in a higher tax bracket; and eliminate the taxation of the portion of the victims' discrimination awards which are designated for attorney's fees.
Companion legislation has been introduced in the House of Representatives by representative Deborah Pryce (R-OH).
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