II 

111TH CONGRESS 

1ST SESSION S. 1360 

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

amounts received on account of claims based on certain unlawful discrimination and to allow income averaging for backpay and frontpay 

awards received on account of such claims, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JUNE 25, 2009 

Mr. BINGAMAN (for himself and Ms. COLLINS) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to exclude 

from gross income amounts received on account of claims 

based on certain unlawful discrimination and to allow 

income averaging for backpay and frontpay awards received on account of such claims, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Civil Rights Tax Relief 

5 Act of 2009’’. 


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1 SEC. 2. EXCLUSION FROM GROSS INCOME FOR AMOUNTS 

2 RECEIVED ON ACCOUNT OF CERTAIN UNLAW3 FUL DISCRIMINATION. 

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 inserting after section 139C the following new section: 

8 ‘‘SEC. 139D. AMOUNTS RECEIVED ON ACCOUNT OF CERTAIN 

9 UNLAWFUL DISCRIMINATION. 

10 ‘‘(a) IN GENERAL.— 

11 ‘‘(1) EXCLUSION.—Gross income does not in12 clude amounts received by a claimant (whether by 

13 suit or agreement and whether as lump sums or 

14 periodic payments) on account of a claim of unlawful 

15 discrimination. 

16 ‘‘(2) AMOUNTS COVERED.—For purposes of 

17 paragraph (1), the term ‘amounts’ does not in18 clude— 

19 ‘‘(A) backpay or frontpay, as defined in 

20 section 1302(b), 

21 ‘‘(B) punitive damages, or 

22 ‘‘(C) such amounts allowed as a deduction 

23 under this chapter. 

24 ‘‘(b) UNLAWFUL DISCRIMINATION DEFINED.—For 

25 purposes of this section, the term ‘unlawful discrimination’ 

26 has the meaning given such term by section 62(e).’’. 


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

2 for part III of subchapter B of chapter 1 of the Internal 

3 Revenue Code of 1986 is amended by inserting after the 

4 item relating to section 139C the following new item: 

‘‘Sec. 139D. Amounts received on account of certain unlawful discrimination.’’. 

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

6 this section shall apply to amounts received in taxable 

7 years beginning after December 31, 2009. 

8 SEC. 3. LIMITATION ON TAX BASED ON INCOME AVER9 AGING FOR BACKPAY AND FRONTPAY RE10 CEIVED ON ACCOUNT OF CERTAIN UNLAW11 FUL EMPLOYMENT DISCRIMINATION. 

12 (a) IN GENERAL.—Part I of subchapter Q of chapter 

13 1 of the Internal Revenue Code of 1986 (relating to in14 come averaging) is amended by adding at the end the fol15 lowing new section: 

16 ‘‘SEC. 1302. INCOME FROM BACKPAY AND FRONTPAY RE17 CEIVED ON ACCOUNT OF CERTAIN UNLAW18 FUL EMPLOYMENT DISCRIMINATION. 

19 ‘‘(a) GENERAL RULE.—If employment discrimination 

20 backpay or frontpay is received by a taxpayer during a 

21 taxable year, the tax imposed by this chapter for such tax22 able year shall not exceed the sum of— 

23 ‘‘(1) the tax which would be so imposed if— 


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1 ‘‘(A) no amount of such backpay or 

2 frontpay were included in gross income for such 

3 year, and 

4 ‘‘(B) no deduction were allowed for such 

5 year for expenses (otherwise allowable as a de6 duction to the taxpayer for such year) in con7 nection with making or prosecuting any claim 

8 of unlawful employment discrimination by or on 

9 behalf of the taxpayer, plus 

10 ‘‘(2) the product of— 

11 ‘‘(A) the number of years in the backpay 

12 period and frontpay period, and 

13 ‘‘(B) the amount by which the tax deter14 mined under paragraph (1) would increase if 

15 the amount on which such tax is determined 

16 were increased by the average annual net back17 pay and frontpay amount. 

18 ‘‘(b) DEFINITIONS.—For purposes of this section— 

19 ‘‘(1) EMPLOYMENT DISCRIMINATION BACKPAY

20 OR FRONTPAY.—The term ‘employment discrimina21 tion backpay or frontpay’ means backpay or 

22 frontpay receivable (whether as lump sums or peri23 odic payments) on account of a claim of unlawful 

24 employment discrimination. 


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1 ‘‘(2) UNLAWFUL EMPLOYMENT DISCRIMINA2 TION.—The term ‘unlawful employment discrimina3 tion’ has the meaning provided the term ‘unlawful 

4 discrimination’ in section 139D(b). 

5 ‘‘(3) BACKPAY AND FRONTPAY.—The terms 

6 ‘backpay’ and ‘frontpay’ mean amounts includible in 

7 gross income in the taxable year— 

8 ‘‘(A) as compensation which is attrib9 utable— 

10 ‘‘(i) in the case of backpay, to services 

11 performed, or that would have been per12 formed but for a claimed violation of law, 

13 as an employee, former employee, or pro14 spective employee before such taxable year 

15 for the taxpayer’s employer, former em16 ployer, or prospective employer; and 

17 ‘‘(ii) in the case of frontpay, to em18 ployment that would have been performed 

19 but for a claimed violation of law, in a tax20 able year or taxable years following the 

21 taxable year; and 

22 ‘‘(B) which are— 

23 ‘‘(i) ordered, recommended, or ap24 proved by any governmental entity to sat25 isfy a claim for a violation of law, or 


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1 ‘‘(ii) received from the settlement of 

2 such a claim. 

3 ‘‘(4) BACKPAY PERIOD.—The term ‘backpay pe4 riod’ means the period during which services are 

5 performed (or would have been performed) to which 

6 backpay is attributable. If such period is not equal 

7 to a whole number of taxable years, such period 

8 shall be increased to the next highest number of 

9 whole taxable years. 

10 ‘‘(5) FRONTPAY PERIOD.—The term ‘frontpay 

11 period’ means the period of foregone employment to 

12 which frontpay is attributable. If such period is not 

13 equal to a whole number of taxable years, such pe14 riod shall be increased to the next highest number 

15 of whole taxable years. 

16 ‘‘(6) AVERAGE ANNUAL NET BACKPAY AND

17 FRONTPAY AMOUNT.—The term ‘average annual net 

18 backpay and frontpay amount’ means the amount 

19 equal to— 

20 ‘‘(A) the excess of— 

21 ‘‘(i) employment discrimination back22 pay and frontpay, over 

23 ‘‘(ii) the amount of deductions that 

24 would have been allowable but for sub25 section (a)(1)(B), divided by 


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1 ‘‘(B) the number of years in the backpay 

2 period and frontpay period.’’. 

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

4 for part I of subchapter Q of chapter 1 of the Internal 

5 Revenue Code of 1986 is amended by inserting after sec6 tion 1301 the following new item: 

‘‘Sec. 1302. Income from backpay and frontpay received on account of certain 

unlawful employment discrimination.’’. 

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

8 this section shall apply to amounts received in taxable 

9 years beginning after December 31, 2009. 

10 SEC. 4. INCOME AVERAGING FOR BACKPAY AND FRONTPAY 

11 RECEIVED ON ACCOUNT OF CERTAIN UNLAW12 FUL EMPLOYMENT DISCRIMINATION NOT TO 

13 INCREASE ALTERNATIVE MINIMUM TAX LI14 ABILITY. 

15 (a) IN GENERAL.—Section 55(c) of the Internal Rev16 enue Code of 1986 (defining regular tax) is amended by 

17 redesignating paragraph (3) as paragraph (4) and by in18 serting after paragraph (2) the following: 

19 ‘‘(3) COORDINATION WITH INCOME AVERAGING

20 FOR AMOUNTS RECEIVED ON ACCOUNT OF EMPLOY21 MENT DISCRIMINATION.—Solely for purposes of this 

22 section, section 1302 (relating to averaging of in23 come from backpay or frontpay received on account 


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1 of certain unlawful employment discrimination) shall 

2 not apply in computing the regular tax.’’. 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 this section shall apply to taxable years beginning after 

5 December 31, 2009. 

Æ 


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