II 

114TH CONGRESS 

1ST SESSION S. 2059 

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 

SEPTEMBER 17, 2015 

Ms. COLLINS (for herself and Mr. CARDIN) 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 Justice Tax Fair5 ness Act of 2015’’. 


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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 before section 140 the following new section: 

8 ‘‘SEC. 139F. 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 judgment or settlement and whether as lump sums 

14 or periodic payments) on account of a claim of un15 lawful 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), or 

21 ‘‘(B) punitive damages. 

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

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

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

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

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


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1 Revenue Code of 1986 is amended by inserting before the 

2 item relating to section 140 the following new item: 

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

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

4 this section shall apply to amounts received in taxable 

5 years beginning after December 31, 2014. 

6 SEC. 3. LIMITATION ON TAX BASED ON INCOME AVER7 AGING FOR BACKPAY AND FRONTPAY RE8 CEIVED ON ACCOUNT OF CERTAIN UNLAW9 FUL EMPLOYMENT DISCRIMINATION. 

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

11 1 of the Internal Revenue Code of 1986 (relating to in12 come averaging) is amended by adding at the end the fol13 lowing new section: 

14 ‘‘SEC. 1302. INCOME FROM BACKPAY AND FRONTPAY RE15 CEIVED ON ACCOUNT OF CERTAIN UNLAW16 FUL EMPLOYMENT DISCRIMINATION. 

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

18 backpay or frontpay is received by a taxpayer during a 

19 taxable year, the tax imposed by this chapter for such tax20 able year shall not exceed the sum of— 

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

22 ‘‘(A) no amount of such backpay or 

23 frontpay were included in gross income for such 

24 year, and 


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

2 year for expenses (otherwise allowable as a de3 duction to the taxpayer for such year) in con4 nection with making or prosecuting any claim 

5 of unlawful employment discrimination by or on 

6 behalf of the taxpayer, plus 

7 ‘‘(2) the product of— 

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

9 period and frontpay period, and 

10 ‘‘(B) the amount by which the tax deter11 mined under paragraph (1) would increase if 

12 the amount on which such tax is determined 

13 were increased by the average annual net back14 pay and frontpay amount. 

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

16 ‘‘(1) EMPLOYMENT DISCRIMINATION BACKPAY

17 OR FRONTPAY.—The term ‘employment discrimina18 tion backpay or frontpay’ means backpay or 

19 frontpay receivable (whether as lump sums or peri20 odic payments) on account of a claim of unlawful 

21 employment discrimination. 

22 ‘‘(2) UNLAWFUL EMPLOYMENT DISCRIMINA23 TION.—The term ‘unlawful employment discrimina24 tion’ has the meaning provided the term ‘unlawful 

25 discrimination’ in section 62(e). 


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

2 ‘backpay’ and ‘frontpay’ mean amounts— 

3 ‘‘(A) which are includible in gross income 

4 in the taxable year as compensation which is at5 tributable— 

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

7 performed, or that would have been per8 formed but for a claimed violation of law, 

9 as an employee, former employee, or pro10 spective employee before such taxable year 

11 for the taxpayer’s employer, former em12 ployer, or prospective employer, and 

13 ‘‘(ii) in the case of frontpay, to em14 ployment that would have been performed 

15 but for a claimed violation of law, in a tax16 able year or taxable years following the 

17 taxable year, and 

18 ‘‘(B) which are received on account of a 

19 judgment or settlement resulting from a claim 

20 for a violation of law. 

21 ‘‘(4) BACKPAY PERIOD.—The term ‘backpay pe22 riod’ means the period during which services are 

23 performed (or would have been performed) to which 

24 backpay is attributable. If such period is not equal 

25 to a whole number of taxable years, such period 


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1 shall be increased to the next highest number of 

2 whole taxable years. 

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

4 period’ means the period of foregone employment to 

5 which frontpay is attributable. If such period is not 

6 equal to a whole number of taxable years, such pe7 riod shall be increased to the next highest number 

8 of whole taxable years. 

9 ‘‘(6) AVERAGE ANNUAL NET BACKPAY AND

10 FRONTPAY AMOUNT.—The term ‘average annual net 

11 backpay and frontpay amount’ means the amount 

12 equal to— 

13 ‘‘(A) the excess of— 

14 ‘‘(i) employment discrimination back15 pay and frontpay, over 

16 ‘‘(ii) the amount of deductions that 

17 would have been allowable but for sub18 section (a)(1)(B), divided by 

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

20 period and frontpay period.’’. 

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

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

23 Revenue Code of 1986 is amended by inserting after sec24 tion 1301 the following new item: 

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

unlawful employment discrimination.’’. 


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

2 this section shall apply to amounts received in taxable 

3 years beginning after December 31, 2014. 

4 SEC. 4. INCOME AVERAGING FOR BACKPAY AND FRONTPAY 

5 RECEIVED ON ACCOUNT OF CERTAIN UNLAW6 FUL EMPLOYMENT DISCRIMINATION NOT TO 

7 INCREASE ALTERNATIVE MINIMUM TAX LI8 ABILITY. 

9 (a) IN GENERAL.—Section 55(c) of the Internal Rev10 enue Code of 1986 (defining regular tax) is amended by 

11 redesignating paragraph (3) as paragraph (4) and by in12 serting after paragraph (2) the following: 

13 ‘‘(3) COORDINATION WITH INCOME AVERAGING

14 FOR AMOUNTS RECEIVED ON ACCOUNT OF EMPLOY15 MENT DISCRIMINATION.—Solely for purposes of this 

16 section, section 1302 (relating to averaging of in17 come from backpay or frontpay received on account 

18 of certain unlawful employment discrimination) shall 

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

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

21 this section shall apply to taxable years beginning after 

22 December 31, 2014. 

Æ 


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