The Civil Rights Tax Relief Act: Questions and Answers
I've received a few questions about the Civil Rights Tax Relief Act of 2007 ("CRTRA"), which is currently pending in Congress so I thought it appropriate to post some information about the bill, what it is designed to do and who supports it.
The CRTRA is meant to end certain types of taxation of damages received by those who have suffered unlawful discrimination or violations of employment rights. The bill was introduced in Congress by John Lewis (D-GA), who was joined by abipartisan group of original cosponsors, including Representative Deborah Pryce (R-OH) and Ways & Means Committee Members Sander Levin (D-MI), Jim Ramstad (R-MN), Xavier Becerra (D-CA), and Phil English (R-PA). The bill number is H.R. 1540.
No one disputes that when employees face employment discrimination and other violations of their employment and civil rights, it is best if they avoid litigation by coming to amicable agreements with their employers. But too often, cases like this are difficult to settle because the cost of settlements is so high. A significant reason for the high cost is the excessive and unfair tax treatment of settlements and awards in employment rights cases.
Today there are two major sources of excessive and unfair taxes in such cases:
You can read a copy of the bill here.
The CRTRA is meant to end certain types of taxation of damages received by those who have suffered unlawful discrimination or violations of employment rights. The bill was introduced in Congress by John Lewis (D-GA), who was joined by abipartisan group of original cosponsors, including Representative Deborah Pryce (R-OH) and Ways & Means Committee Members Sander Levin (D-MI), Jim Ramstad (R-MN), Xavier Becerra (D-CA), and Phil English (R-PA). The bill number is H.R. 1540.
No one disputes that when employees face employment discrimination and other violations of their employment and civil rights, it is best if they avoid litigation by coming to amicable agreements with their employers. But too often, cases like this are difficult to settle because the cost of settlements is so high. A significant reason for the high cost is the excessive and unfair tax treatment of settlements and awards in employment rights cases.
Today there are two major sources of excessive and unfair taxes in such cases:
- taxation of damages for noneconomic harm that employees suffer as a result of egregious, intentional harassment, retaliation, or similar workplace wrongs; and
- taxation of lump-sum settlements or awards that compensate for lost back pay over a period of years at the artificially high marginal tax rates of the year of receipt.
- it eliminates noneconomic damages from gross income; and
- it permits income averaging for back pay received in a lump sum.
You can read a copy of the bill here.
