I

106TH CONGRESS

1ST SESSION H. R. 1997

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 HOUSE OF REPRESENTATIVES

MAY 27, 1999

Ms. PRYCE of Ohio (for herself and Mr. LEWIS of Georgia) 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 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 Fair5 ness Act of 1999’’.
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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 redesignating section 139 as section 140) and by in8 serting after section 138 the following new section:

9 ‘‘SEC. 139. AMOUNTS RECEIVED ON ACCOUNT OF CERTAIN

10 UNLAWFUL DISCRIMINATION.

11 ‘‘(a) IN GENERAL.—

12 ‘‘(1) EXCLUSION.—Gross income does not in13 clude amounts received by a claimant (whether by

14 suit or agreement and whether as lump sums or

15 periodic payments) on account of a claim of unlawful

16 discrimination.

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

18 paragraph (1), the term ‘amounts’ does not

19 include—

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

21 section 1302(b), or

22 ‘‘(B) punitive damages.

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

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

25 means an act that is unlawful under any of the following:
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1 ‘‘(1) Section 302 of the Civil Rights Act of

2 1991 (2 U.S.C. 1202).

3 ‘‘(2) Section 201, 202, 203, 204, 205, 206, or

4 207 of the Congressional Accountability Act of 1995

5 (2 U.S.C. 1311, 1312, 1313, 1314, 1315, 1316, or

6 1317)

7 ‘‘(3) The Fair Labor Standards Act of 1938

8 (29 U.S.C. 201 et seq.).

9 ‘‘(4) Section 4 or 15 of the Age Discrimination

10 in Employment Act of 1967 (29 U.S.C. 623 or

11 633a).

12 ‘‘(5) Section 501 or 504 of the Rehabilitation

13 Act of 1973 (29 U.S.C. 791 or 794).

14 ‘‘(6) Section 510 of the Employee Retirement

15 Income Security Act of 1974 (29 U.S.C. 1140).

16 ‘‘(7) Title IX of the Education Amendments of

17 1972 (29 U.S.C. 1681 et seq.).

18 ‘‘(8) The Employee Polygraph Protection Act of

19 1988 (29 U.S.C. 201 et seq.).

20 ‘‘(9) The Worker Adjustment and Retraining

21 Notification Act (29 U.S.C. 2102 et seq.).

22 ‘‘(10) Section 105 of the Family and Medical

23 Leave Act of 1993 (29 U.S.C. 2615).
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1 ‘‘(11) Chapter 43 of title 38, United States

2 Code (relating to employment and reemployment

3 rights of members of the uniformed services).

4 ‘‘(12) Section 1977, 1979, or 1980 of the Re5 vised Statutes (42 U.S.C. 1981, 1983, or 1985).

6 ‘‘(13) Section 703, 704, or 717 of the Civil

7 Rights Act of 1964 (42 U.S.C. 2000e–2, 2000e–3,

8 or 2000e–16).

9 ‘‘(14) Section 804 or 805 of the Fair Housing

10 Act (42 U.S.C. 3604 or 3605).

11 ‘‘(15) Section 102, 202, 302, or 503 of the

12 Americans with Disabilities Act of 1990 (42 U.S.C.

13 12112, 12132, 12182, or 12203).

14 ‘‘(16) Section 40302 of the Violence Against

15 Women Act of 1994 (42 U.S.C. 13981).

16 ‘‘(17) Any provision of Federal law (popularly

17 known as whistleblower protection provisions) pro18 hibiting the discharge of an employee, the discrimi19 nation against an employee, or any other form of re20 taliation or reprisal against an employee for assert21 ing rights or taking other actions permitted under

22 Federal law.

23 ‘‘(18) Any provision of State or local law, or

24 common law claims permitted under Federal, State,

25 or local law, providing for the enforcement of civil
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1 rights, regulating any aspect of the employment re2 lationship, or prohibiting the discharge of an em3 ployee, the discrimination against an employee, or

4 any other form of retaliation or reprisal against an

5 employee for asserting rights or taking other actions

6 permitted by law.’’.

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

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

9 is amended by inserting after the item relating to section

10 138 the following new item:

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

11 (c) EFFECTIVE DATE.—The amendment made by

12 this section shall apply to damages received in taxable

13 years beginning after December 31, 1998.

14 SEC. 3. LIMITATION ON TAX BASED ON INCOME AVER15 AGING FOR BACKPAY AND FRONTPAY RE16 CEIVED ON ACCOUNT OF CERTAIN UNLAW17 FUL EMPLOYMENT DISCRIMINATION.

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

19 1 of the Internal Revenue Code of 1986 (relating to in20 come averaging) is amended by adding at the end the fol21 lowing new section:
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1 ‘‘SEC. 1302. INCOME FROM BACKPAY AND FRONTPAY RE2 CEIVED ON ACCOUNT OF CERTAIN UNLAW3 FUL EMPLOYMENT DISCRIMINATION.

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

5 backpay or frontpay is received by a taxpayer during a

6 taxable year, the tax imposed by this chapter for such tax7 able year shall not exceed the sum of—

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

9 ‘‘(A) no amount of such backpay or

10 frontpay were included in gross income for such

11 year, and

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

13 year for expenses (otherwise allowable as a de14 duction to the taxpayer for such year) in con15 nection with making or prosecuting any claim

16 of unlawful employment discrimination by or on

17 behalf of the taxpayer, plus

18 ‘‘(2) the product of—

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

20 period and frontpay period, and

21 ‘‘(B) the amount of tax that would be im22 posed on the average annual net backpay and

23 frontpay amount, determined as if such average

24 amount were the only income of the taxpayer

25 for the taxable year and the taxpayer had no

26 deductions for such year.
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1 ‘‘(b) DEFINITIONS.—For purposes of this section—

2 ‘‘(1) EMPLOYMENT DISCRIMINATION BACKPAY

3 OR FRONTPAY.—The term ‘employment discrimina4 tion backpay or frontpay’ means backpay or

5 frontpay receivable (whether as lump sums or peri6 odic payments) on account of a claim of unlawful

7 employment discrimination.

8 ‘‘(2) UNLAWFUL EMPLOYMENT DISCRIMINA9 TION.—The term ‘unlawful employment discrimina10 tion’ has the meaning provided the term ‘unlawful

11 discrimination’ in section 139(b).

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

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

14 gross income in the taxable year—

15 ‘‘(A) as compensation which is

16 attributable—

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

18 performed, or that would have been per19 formed but for a claimed violation of law,

20 as an employee, former employee, or pro21 spective employee before such taxable year

22 for the taxpayer’s employer, former em23 ployer, or prospective employer; and

24 ‘‘(ii) in the case of frontpay, to em25 ployment that would have been performed
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1 but for a claimed violation of law, in a tax2 able year or taxable years following the

3 taxable year; and

4 ‘‘(B) which are—

5 ‘‘(i) ordered, recommended, or ap6 proved by any governmental entity to sat7 isfy a claim for a violation of law, or

8 ‘‘(ii) received from the settlement of

9 such a claim.

10 ‘‘(4) BACKPAY PERIOD.—The term ‘backpay pe11 riod’ means the period during which services are

12 performed (or would have been performed) to which

13 backpay is attributable. If such period is not equal

14 to a whole number of taxable years, such period

15 shall be increased to the next highest number of

16 whole taxable years.

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

18 period’ means the period of foregone employment to

19 which frontpay is attributable. If such period is not

20 equal to a whole number of taxable years, such pe21 riod shall be increased to the next highest number

22 of whole taxable years.

23 ‘‘(6) AVERAGE ANNUAL NET BACKPAY AND

24 FRONTPAY AMOUNT.—The term ‘average annual net
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1 backpay and frontpay amount’ means the amount

2 equal to—

3 ‘‘(A) the excess of—

4 ‘‘(i) employment discrimination back5 pay and frontpay, over

6 ‘‘(ii) the amount of deductions that

7 would have been allowable but for sub8 section (a)(1)(B), divided by

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

10 period and frontpay period.’’.

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

12 for part I of subchapter Q of chapter 1 of such Code is

13 amended by inserting after section 1301 the following new

14 item:

‘‘Sec. 1302. Income from backpay or frontpay received on account

of certain unlawful employment discrimination.’’

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

16 this section shall apply to amounts received in taxable

17 years beginning after December 31, 1998.

18 SEC. 3. INCOME AVERAGING FOR BACKPAY AND FRONTPAY

19 RECEIVED ON ACCOUNT OF CERTAIN UNLAW20 FUL EMPLOYMENT DISCRIMINATION NOT TO

21 INCREASE ALTERNATIVE MINIMUM TAX LI22 ABILITY.

23 (a) IN GENERAL.—Section 55(c) of the Internal Rev24 enue Code of 1986 (defining regular tax) is amended by
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1 redesignating paragraph (2) as paragraph (3) and by in2 serting after paragraph (1) the following:

3 ‘‘(2) COORDINATION WITH INCOME AVERAGING

4 FOR AMOUNTS RECEIVED ON ACCOUNT OF EMPLOY5 MENT DISCRIMINATION.—Solely for purposes of this

6 section, section 1302 (relating to averaging of in7 come from backpay or frontpay received on account

8 of certain unlawful employment discrimination) shall

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

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

11 this section shall apply to taxable years beginning after

12 December 31, 1998.

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