I

106TH CONGRESS

1ST SESSION H. R. 622

To amend the Internal Revenue Code of 1986 to exclude from gross income

rewards received by reason of providing information leading to the conviction of a crime to the extent that the reward is used to compensate

victims of crime.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 8, 1999

Mr. HOUGHTON (for himself, Mr. MCNULTY, Mr. TOWNS, Mr. LAFALCE, Mr.

FROST, Mr. KING, Mr. NEAL of Massachusetts, Mr. HAYWORTH, Mr.

HINCHEY, Mr. HINOJOSA, and Mr. WAXMAN) introduced the following

bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to exclude

from gross income rewards received by reason of providing information leading to the conviction of a crime

to the extent that the reward is used to compensate

victims of crime.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. EXCLUSION FROM INCOME OF CERTAIN RE2 WARDS USED TO COMPENSATE VICTIMS OF

3 CRIME.

4 (a) IN GENERAL.—Part III of subchapter B of chap5 ter 1 of the Internal Revenue Code of 1986 (relating to

6 items specifically excluded from gross income) is amended

7 by redesignating section 139 as section 140 and by insert8 ing after section 138 the following new section:

9 ‘‘SEC. 139. CERTAIN REWARDS USED TO COMPENSATE VIC10 TIMS OF CRIME.

11 ‘‘(a) IN GENERAL.—Gross income shall not include

12 an amount received as a reward for providing information

13 leading to a conviction of a crime to the extent such

14 amount is used for a qualified purpose within 1 year after

15 the date such amount is received.

16 ‘‘(b) QUALIFIED PURPOSE.—For purposes of sub17 section (a)—

18 ‘‘(1) IN GENERAL.—The term ‘qualified pur19 pose’ means making payments to—

20 ‘‘(A) the victims (or their families) of the

21 crime to which the reward relates,

22 ‘‘(B) an irrevocable trust established exclu23 sively for the benefit of such victims and their

24 families, or

25 ‘‘(C) an organization which is described in

26 section 501(c)(3) and exempt from tax under
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1 section 501(a) and the principal purpose of

2 which is to provide compensation to victims of

3 crime.

4 ‘‘(2) ATTORNEYS FEES ELIGIBLE IF VICTIMS

5 RECEIVE PORTION OF REWARD.—Such term includes

6 payments to the taxpayer’s attorneys for attorneys’

7 fees incurred by the taxpayer in connection with the

8 case if substantially all of the reward (other than

9 amounts paid to such attorneys) is paid for a quali10 fied purpose described in paragraph (1).

11 ‘‘(c) SPECIAL RULES.—In the case of a payment by

12 the taxpayer which is taken into account under subsection

13 (b)—

14 ‘‘(1) no deduction shall be allowed under this

15 title for such payment, and

16 ‘‘(2) such payment shall not be treated as a gift

17 for purposes of subtitle B.’’

18 (b) CLERICAL AMENDMENT.—The table of sections

19 for part III of subchapter B of chapter 1 of such Code

20 is amended by striking the last item and inserting the fol21 lowing:

‘‘Sec. 139. Certain rewards used to compensate victims of crime.

‘‘Sec. 140. Cross references to other Acts.’’

22 (c) EFFECTIVE DATE.—The amendments made by

23 this section shall apply to rewards received after December

24 31, 1997. In no event shall the 1-year period referred to
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1 in section 139(a) of the Internal Revenue Code of 1986

2 (as added by this section) expire before the 60th day after

3 the date of the enactment of this Act.

Æ