II 

115TH CONGRESS 

2D SESSION S. 2988 

To amend the Internal Revenue Code of 1986 to modify the tax treatment 

of amounts related to employment discrimination and harassment in 

the workplace, including sexual harassment, sexual assault, and harassment based on protected categories. 

IN THE SENATE OF THE UNITED STATES 

JUNE 5, 2018 

Ms. HARRIS (for herself and Ms. MURKOWSKI) 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 modify 

the tax treatment of amounts related to employment 

discrimination and harassment in the workplace, including sexual harassment, sexual assault, and harassment 

based on protected categories. 

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 ‘‘Ending the Monopoly 

5 of Power Over Workplace Harassment through Education 

6 and Reporting Act – Part 2’’ or the ‘‘EMPOWER Act 

7 – Part 2’’. 


pbinns on DSK79D2C42PROD with BILLS
2 

•S 2988 IS

1 SEC. 2. TAX TREATMENT OF AMOUNTS RELATED TO JUDG2 MENTS. 

3 (a) DENIAL OF DEDUCTION.— 

4 (1) IN GENERAL.—Part IX of subchapter B of 

5 chapter 1 of the Internal Revenue Code of 1986 is 

6 amended by adding at the end the following new sec7 tion: 

8 ‘‘SEC. 280I. AMOUNTS RELATED TO JUDGMENTS WITH RE9 SPECT TO WORKPLACE HARASSMENT, IN10 CLUDING SEXUAL HARASSMENT. 

11 ‘‘No deduction shall be allowed under this chapter for 

12 amounts paid or incurred by the taxpayer— 

13 ‘‘(1) pursuant to any judgment or award in liti14 gation related to workplace harassment, including 

15 sexual harassment, or 

16 ‘‘(2) for expenses and attorney’s fees in connec17 tion with the litigation resulting in the judgment or 

18 award described in paragraph (1) (other than ex19 penses or attorney’s fees paid by the workplace har20 assment plaintiff or claimant), or for any insurance 

21 covering the defense or liability of the underlying 

22 claims with respect to such litigation.’’. 

23 (2) CLERICAL AMENDMENT.—The table of sec24 tions for part IX of subchapter B of chapter 1 of 

25 such Code is amended by adding at the end the fol26 lowing new item: 


pbinns on DSK79D2C42PROD with BILLS
3 

•S 2988 IS

‘‘Sec. 280I. Amounts related to judgments with respect to workplace harassment, including sexual harassment.’’. 

1 (3) CONFORMING AMENDMENT.—Section 162 

2 of such Code is amended by striking subsection (q). 

3 (4) EFFECTIVE DATE.—The amendments made 

4 by this subsection shall apply to amounts paid or in5 curred in taxable years beginning after the date of 

6 the enactment of this Act. 

7 (b) EXCLUSION FROM INCOME.— 

8 (1) IN GENERAL.—Part III of subchapter B of 

9 chapter 1 of the Internal Revenue Code of 1986 is 

10 amended by inserting after section 139G the fol11 lowing new section: 

12 ‘‘SEC. 139H. AMOUNTS RECEIVED IN CONNECTION WITH 

13 JUDGMENTS, AWARDS, AND SETTLEMENTS 

14 WITH RESPECT TO WORKPLACE HARASS15 MENT. 

16 ‘‘Gross income shall not include any amount received 

17 in connection with a judgment or award in, or a settlement 

18 of— 

19 ‘‘(1) a claim related to workplace harassment, 

20 including sexual harassment or other unlawful dis21 crimination, or 

22 ‘‘(2) any other claim of unlawful discrimination 

23 (as defined by section 62(e)). 


pbinns on DSK79D2C42PROD with BILLS
4 

•S 2988 IS

1 The preceding sentence shall not include any employment 

2 discrimination compensation to which section 1302 ap3 plies.’’. 

4 (2) CLERICAL AMENDMENT.—The table of sec5 tions for part III of subchapter B of chapter 1 of 

6 such Code is amended by inserting after the item re7 lating to section 139G the following new item: 

‘‘Sec. 139H. Amounts received in connection with judgments, awards, or settlements with respect to workplace harassment.’’. 

8 (3) EFFECTIVE DATE.—The amendments made 

9 by this subsection shall apply to amounts received in 

10 taxable years beginning after the date of the enact11 ment of this Act. 

12 SEC. 3. LIMITATION ON TAX BASED ON INCOME AVER13 AGING FOR COMPENSATION RECEIVED ON 

14 ACCOUNT OF CERTAIN UNLAWFUL EMPLOY15 MENT DISCRIMINATION. 

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

17 1 of the Internal Revenue Code of 1986 (relating to in18 come averaging) is amended by adding at the end the fol19 lowing new section: 

20 ‘‘SEC. 1302. INCOME FROM COMPENSATION RECEIVED ON 

21 ACCOUNT OF CERTAIN UNLAWFUL EMPLOY22 MENT DISCRIMINATION. 

23 ‘‘(a) GENERAL RULE.—In the case of any employ24 ment discrimination compensation received during any 


pbinns on DSK79D2C42PROD with BILLS
5 

•S 2988 IS

1 taxable year, the tax imposed by this chapter for such tax2 able year with respect to such compensation shall not ex3 ceed the sum of— 

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

5 ‘‘(A) no amount of such compensation 

6 were included in gross income for such year, 

7 and 

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

9 year for expenses otherwise allowable as a de10 duction to the taxpayer for such year in connec11 tion with making or prosecuting any claim of 

12 unlawful employment discrimination by or on 

13 behalf of the taxpayer, plus 

14 ‘‘(2) the product of— 

15 ‘‘(A) the combined number of years in the 

16 backpay period and the foregone compensation 

17 period, and 

18 ‘‘(B) the amount by which the tax deter19 mined under paragraph (1) would increase if 

20 the sum of— 

21 ‘‘(i) the average of the average annual 

22 net employment discrimination compensa23 tion in the backpay period, and 

24 ‘‘(ii) the average of the average an25 nual net employment discrimination comVerDate Sep 11 2014 23:25 Jun 05, 2018 Jkt 079200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S2988.IS S2988

pbinns on DSK79D2C42PROD with BILLS
6 

•S 2988 IS

1 pensation in the foregone compensation pe2 riod, 

3 were included in gross income for such year. 

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

5 ‘‘(1) EMPLOYMENT DISCRIMINATION COM6 PENSATION.—The term ‘employment discrimination 

7 compensation’ means any backpay or foregone com8 pensation receivable (whether as lump sums or peri9 odic payments) on account of a judgment or settle10 ment resulting from a claim of unlawful discrimina11 tion (as defined in section 62(e)) in violation of law 

12 which relates to employment. 

13 ‘‘(2) BACKPAY.—The term ‘backpay’ means 

14 amounts which are includible in gross income for the 

15 taxable year as compensation which is attributable 

16 to services performed (or which would have been 

17 performed but for the violation of law described in 

18 paragraph (1)) as an employee, former employee, or 

19 prospective employee in years before such taxable 

20 year for the taxpayer’s employer, former employer, 

21 or prospective employer. 

22 ‘‘(3) FOREGONE COMPENSATION.—The term 

23 ‘foregone compensation’ means amounts which are 

24 includible in gross income for the taxable year as 

25 compensation which is attributable to services which 


pbinns on DSK79D2C42PROD with BILLS
7 

•S 2988 IS

1 would have been performed in years after such tax2 able year but for the violation of law described in 

3 paragraph (1). 

4 ‘‘(4) BACKPAY PERIOD.—The term ‘backpay pe5 riod’ means the period during which services de6 scribed in paragraph (2) were performed or would 

7 have been performed but for the violation of law de8 scribed in paragraph (1). If such period is not equal 

9 to a whole number of taxable years, such period 

10 shall be increased to the next highest number of 

11 whole taxable years. 

12 ‘‘(5) FOREGONE COMPENSATION PERIOD.—The 

13 term ‘foregone compensation period’ means the pe14 riod during which services described in paragraph 

15 (3) would have been performed but for the violation 

16 of law described in paragraph (1). If such period is 

17 not equal to a whole number of taxable years, such 

18 period shall be increased to the next highest number 

19 of whole taxable years. 

20 ‘‘(6) AVERAGE ANNUAL NET EMPLOYMENT DIS21 CRIMINATION COMPENSATION.—The term ‘average 

22 annual net employment discrimination compensation’ 

23 with respect to any period means the amount equal 

24 to— 

25 ‘‘(A) the excess of— 


pbinns on DSK79D2C42PROD with BILLS
8 

•S 2988 IS

1 ‘‘(i) employment discrimination com2 pensation attributable to such period, over 

3 ‘‘(ii) the amount of the deductions de4 scribed in subsection (a)(1)(B), divided by 

5 ‘‘(B) the total number of years in the 

6 backpay period and the foregone compensation 

7 period.’’. 

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

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

10 Revenue Code of 1986 is amended by inserting after sec11 tion 1301 the following new item: 

‘‘Sec. 1302. Income from compensation received on account of certain unlawful 

employment discrimination.’’. 

12 (c) INCOME AVERAGING NOT TO INCREASE ALTER13 NATIVE MINIMUM TAX LIABILITY.—Section 55(c) of the 

14 Internal Revenue Code of 1986 is amended by redesig15 nating paragraph (3) as paragraph (4) and by inserting 

16 after paragraph (2) the following new paragraph: 

17 ‘‘(3) COORDINATION WITH INCOME AVERAGING

18 FOR AMOUNTS RECEIVED ON ACCOUNT OF EMPLOY19 MENT DISCRIMINATION.—Solely for purposes of this 

20 section, section 1302 shall not apply in computing 

21 the regular tax liability.’’. 

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

23 this section shall apply to amounts paid or incurred in taxVerDate Sep 11 2014 23:25 Jun 05, 2018 Jkt 079200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2988.IS S2988

pbinns on DSK79D2C42PROD with BILLS
9 

•S 2988 IS

1 able years beginning after the date of the enactment of 

2 this Act. 

Æ 


pbinns on DSK79D2C42PROD with BILLS