I
105TH CONGRESS
1ST SESSION
H. R. 2792
To amend the Internal Revenue Code of 1986 to provide for the treatment
of expenses incurred in asserting any claim of employment discrimination
and for damages and back pay received on account of employment
discrimination.
IN THE HOUSE OF REPRESENTATIVES
OCTOBER 31, 1997
Mr. SOLOMON 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 provide
for the treatment of expenses incurred in asserting any
claim of employment discrimination and for damages and
back pay received on account of employment discrimina-
tion.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Employment Discrimi-
nation Award Tax Relief Act’’.
SEC. 2. DEDUCTION OF EXPENSES PAID OR INCURRED IN
CONNECTION WITH ASSERTING OR PROS-
ECUTING A CLAIM FOR AGE, GENDER, RACE,
OR OTHER FORM OF PROHIBITED EMPLOY-
MENT DISCRIMINATION OR FOR RELATED
CLAIMS.
(a) IN GENERAL.—Paragraph (2) of section 62(a) of
the Internal Revenue Code of 1986 (relating to the defini-
tion of adjusted gross income) is amended by adding after
subparagraph (C) the following new subparagraph:
‘‘(D) EXPENSES OF EMPLOYEES IN BRING-
ING OR PROSECUTING EMPLOYMENT DISCRIMI-
NATION CLAIMS OR RELATED CLAIMS.—The de-
ductions allowed by part VI (section 161 and
following) which consist of expenses paid or in-
curred by the taxpayer in connection with the
assertion or the prosecution by or on behalf of
the taxpayer as an employee or a former em-
ployee, against the taxpayer’s employer or
former employer, of any claim—
‘‘(i) for age, gender, race, or other
form of employment discrimination prohib-
ited by Federal, State, or local law, or
‘‘(ii) for emotional distress or other
injury relating to such claimed employment
discrimination.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to expenses paid or incurred in
taxable years beginning after December 31, 1985.
SEC. 3. TREATMENT FOR ALTERNATIVE MINIMUM TAX PUR-
POSES OF EXPENSES PAID OR INCURRED IN
CONNECTION WITH ASSERTING OR PROS-
ECUTING A CLAIM FOR AGE, GENDER, RACE,
OR OTHER FORM OF PROHIBITED EMPLOY-
MENT DISCRIMINATION OR FOR RELATED
CLAIMS.
(a) IN GENERAL.—Clause (i) of section 56(b)(1)(A)
of the Internal Revenue Code of 1986 (relating to adjust-
ments in computing alternative minimum taxable income
and as applicable to individuals) is amended by inserting
before the comma ‘‘other than the deductions allowed by
part VI (section 161 and following) which consist of ex-
penses paid or incurred by the taxpayer in connection with
the assertion or the prosecution by or on behalf of the
taxpayer, as an employee or a former employee, against
the taxpayer’s employer or former employer, of any
claim—
‘‘(I) for age, gender, race, or
other form of employment discrimina-
tion prohibited by Federal, State, or
local law, or
‘‘(II) for emotional distress or
other injury relating to such claimed
employment discrimination.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to expenses paid or incurred in
taxable years beginning after December 31, 1985.
SEC. 4. EXCLUSION FROM GROSS INCOME FOR DAMAGES
RECEIVED ON ACCOUNT OF AGE, GENDER,
RACE, AND OTHER FORMS OF PROHIBITED
EMPLOYMENT DISCRIMINATION.
(a) IN GENERAL.—Section 104(a) of the Internal
Revenue Code of 1986 (relating to compensation for inju-
ries or sickness) is amended by striking ‘‘and’’ at the end
of paragraph (4), by striking the period at the end of para-
graph (5) and inserting ‘‘; and’’, and adding after para-
graph (5) the following new paragraph:
‘‘(6) amounts received (whether by suit or
agreement and whether as lump sums or as periodic
payments) on account of any claim—
‘‘(A) for age, gender, race, or other form
of employment discrimination prohibited by
Federal, State, or local law (other than
amounts representing backpay), or
‘‘(B) for emotional distress or other injury
relating to such claimed employment discrimi-
nation.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to amounts received in taxable
years beginning after December 31, 1985.
SEC. 5. LIMITATION ON TAX BASED ON INCOME AVERAG-
ING FOR BACKPAY RECEIVED ON ACCOUNT
OF AGE, GENDER, RACE, AND OTHER FORMS
OF PROHIBITED EMPLOYMENT DISCRIMINA-
TION.
(a) IN GENERAL.—Subchapter Q of chapter 1 of the
Internal Revenue Code of 1986 (relating to readjustment
of tax between years and special limitations) is amended
by inserting after the table of parts the following new part:
‘‘PART I—AVERAGING OF INCOME FROM BACK-
PAY AWARDS RECEIVED ON ACCOUNT OF
EMPLOYMENT DISCRIMINATION
‘‘Sec. 1301. Income from backpay received on account of age,
gender, race, and other forms of prohibited employ-
ment discrimination.
‘‘SEC. 1301. INCOME FROM BACKPAY RECEIVED ON AC-
COUNT OF AGE, GENDER, RACE, AND OTHER
FORMS OF PROHIBITED EMPLOYMENT DIS-
CRIMINATION.
‘‘(a) GENERAL RULE.—If employment discrimination
backpay is received by a taxpayer during a taxable year,
the tax imposed by this chapter for such taxable year shall
not exceed the sum of—
‘‘(1) the tax which would be so imposed if—
‘‘(A) no amount of such backpay were in-
cluded in gross income for such year, and
‘‘(B) no deduction were allowed for such
year for expenses (otherwise allowable as a de-
duction to the taxpayer for such year) in con-
nection with making or prosecuting any claim
for age, gender, race, or other form of employ-
ment discrimination by or on behalf of the tax-
payer, plus
‘‘(2) the product of—
‘‘(A) the number of years in the backpay
period, and
‘‘(B) the amount by which the tax deter-
mined under paragraph (1) would increase if
the amount on which such tax is determined
were increased by the average annual net back-
pay amount.
‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) EMPLOYMENT
DISCRIMINATION
BACK-
PAY.—The term ‘employment discrimination back-
pay’ means backpay on account of any claim for age,
gender, race, or other form of employment discrimi-
nation prohibited by Federal, State, or local law
made by or on behalf of the taxpayer.
‘‘(2) BACKPAY.—The term ‘backpay’ means
amounts includible in gross income—
‘‘(A) which are wages, salaries, retirement
pay, or other similar compensation,
‘‘(B) which are received during the taxable
year by the taxpayer for services performed as
an employee or former employee before such
taxable year for the taxpayer’s employer or
former employer, and
‘‘(C) which are ordered, recommended, or
approved by any Federal or State agency or
which are amounts received from an award in,
or the settlement of, a lawsuit or threatened
lawsuit (in either case, regardless of whether as
lump sums or as periodic payments).
‘‘(3) BACKPAY PERIOD.—The term ‘backpay pe-
riod’ means the period during which the services are
performed to which the employment discrimination
backpay is attributable. If such period is not equal
to a whole number of taxable years, such period
shall be increased to next highest number of whole
taxable years.
‘‘(4) 
AVERAGE
ANNUAL
NET
BACKPAY
AMOUNT.—The term ‘average annual net backpay
amount’ means the amount equal to—
‘‘(A) the excess of—
‘‘(i) the amount not includible in
gross income by reason of subsection
(a)(1)(A), over
‘‘(ii) the amount not allowable as a
deduction 
by 
reason 
of 
subsection
(a)(1)(B), divided by
‘‘(B) the number of years in the backpay
period.’’
(b) CLERICAL AMENDMENT.—The table of parts for
subchapter Q of chapter 1 of such Code is amended by
inserting the following new item before the item relating
to part V:
‘‘Part I. Averaging of income from backpay awards received on
account of employment discrimination.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts received in taxable
years beginning after December 31, 1985.
SEC. 6. WAIVER OF STATUTE OF LIMITATIONS.
If refund or credit of any overpayment of tax result-
ing from any amendment made by this Act is prevented
at any time before the close of the 1-year period beginning
on the date of the enactment of this Act by the operation
of any law or rule of law (including res judicata), refund
or credit of such overpayment (to the extent attributable
to such amendment) may, nevertheless, be made or al-
lowed if claim therefor is filed before the close of such
1-year period.
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