I
106TH CONGRESS
2D SESSION
H. R. 4570
To amend the Internal Revenue Code of 1986 to exclude from gross income
amounts received on account of claims based on certain unlawful dis-
crimination 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 25, 2000
Ms. PRYCE of Ohio (for herself, Mr. LEWIS of Georgia, Mr. ABERCROMBIE,
Mr. ANDREWS, Mr. BECERRA, Mr. BLAGOJEVICH, Mr. CAMPBELL, Mr.
DIXON, Mr. EVERETT, Mr. FROST, Mr. GEJDENSON, Mrs. JOHNSON of
Connecticut, Mr. LARSON, Ms. LEE, Mr. MATSUI, Mrs. MORELLA, Ms.
NORTON, Ms. PELOSI, Mr. PETRI, Mr. RAMSTAD, Mr. RANGEL, Mr.
RODRIGUEZ, Mr. SANDERS, Mrs. THURMAN, Mr. TRAFICANT, Ms.
VELA´ZQUEZ, Mr. VENTO, Mr. WEXLER, and Mr. WISE) 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 re-
ceived on account of such claims, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
‘‘(10) Section 105 of the Family and Medical
Leave Act of 1993 (29 U.S.C. 2615).
‘‘(11) Chapter 43 of title 38, United States
Code (relating to employment and reemployment
rights of members of the uniformed services).
‘‘(12) Section 1977, 1979, or 1980 of the Re-
vised Statutes (42 U.S.C. 1981, 1983, or 1985).
‘‘(13) Section 703, 704, or 717 of the Civil
Rights Act of 1964 (42 U.S.C. 2000e–2, 2000e–3,
or 2000e–16).
‘‘(14) Section 804 or 805 of the Fair Housing
Act (42 U.S.C. 3604 or 3605).
‘‘(15) Section 102, 202, 302, or 503 of the
Americans with Disabilities Act of 1990 (42 U.S.C.
12112, 12132, 12182, or 12203).
‘‘(16) Section 40302 of the Violence Against
Women Act of 1994 (42 U.S.C. 13981).
‘‘(17) Any provision of Federal law (popularly
known as whistleblower protection provisions) pro-
hibiting the discharge of an employee, the discrimi-
nation against an employee, or any other form of re-
taliation or reprisal against an employee for assert-
ing rights or taking other actions permitted under
Federal law.
‘‘(18) Any provision of State or local law, or
common law claims permitted under Federal, State,
or local law, providing for the enforcement of civil
rights or prohibiting the discharge of an employee,
the discrimination against an employee, or any other
form of retaliation or reprisal against an employee
for asserting rights or taking other actions per-
mitted by law.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for part III of subchapter B of chapter 1 of such Code
is amended by inserting after the item relating to section
138 the following new item:
‘‘Sec. 139. Amounts received on account of certain unlawful dis-
crimination.’’
(c) EFFECTIVE DATE.—The amendment made by
this section shall apply to damages received in taxable
years beginning after December 31, 2000.
SEC. 3. LIMITATION ON TAX BASED ON INCOME AVER-
AGING FOR BACKPAY AND FRONTPAY RE-
CEIVED ON ACCOUNT OF CERTAIN UNLAW-
FUL EMPLOYMENT DISCRIMINATION.
(a) IN GENERAL.—Part I of subchapter Q of chapter
1 of the Internal Revenue Code of 1986 (relating to in-
come averaging) is amended by adding at the end the fol-
lowing new section:
‘‘SEC. 1302. INCOME FROM BACKPAY AND FRONTPAY RE-
CEIVED ON ACCOUNT OF CERTAIN UNLAW-
FUL EMPLOYMENT DISCRIMINATION.
‘‘(a) GENERAL RULE.—If employment discrimination
backpay or frontpay is received by a taxpayer during a
taxable year, the tax imposed by this chapter for such tax-
able year shall not exceed the sum of—
‘‘(1) the tax which would be so imposed if—
‘‘(A) no amount of such backpay or
frontpay were included 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
of unlawful employment discrimination by or on
behalf of the taxpayer, plus
‘‘(2) the product of—
‘‘(A) the number of years in the backpay
period and frontpay 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 and frontpay amount.
‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) EMPLOYMENT DISCRIMINATION BACKPAY
OR FRONTPAY.—The term ‘employment discrimina-
tion backpay or frontpay’ means backpay or
frontpay receivable (whether as lump sums or peri-
odic payments) on account of a claim of unlawful
employment discrimination.
‘‘(2) UNLAWFUL
EMPLOYMENT
DISCRIMINA-
TION.—The term ‘unlawful employment discrimina-
tion’ has the meaning provided the term ‘unlawful
discrimination’ in section 139(b).
‘‘(3) BACKPAY
AND
FRONTPAY.—The terms
‘backpay’ and ‘frontpay’ mean amounts includible in
gross income in the taxable year—
‘‘(A) 
as 
compensation 
which 
is
attributable—
‘‘(i) in the case of backpay, to services
performed, or that would have been per-
formed but for a claimed violation of law,
as an employee, former employee, or pro-
spective employee before such taxable year
for the taxpayer’s employer, former em-
ployer, or prospective employer; and
‘‘(ii) in the case of frontpay, to em-
ployment that would have been performed
but for a claimed violation of law, in a tax-
able year or taxable years following the
taxable year; and
‘‘(B) which are—
‘‘(i) ordered, recommended, or ap-
proved by any governmental entity to sat-
isfy a claim for a violation of law, or
‘‘(ii) received from the settlement of
such a claim.
‘‘(4) BACKPAY PERIOD.—The term ‘backpay pe-
riod’ means the period during which services are
performed (or would have been performed) to which
backpay is attributable. If such period is not equal
to a whole number of taxable years, such period
shall be increased to the next highest number of
whole taxable years.
‘‘(5) FRONTPAY PERIOD.—The term ‘frontpay
period’ means the period of foregone employment to
which frontpay is attributable. If such period is not
equal to a whole number of taxable years, such pe-
riod shall be increased to the next highest number
of whole taxable years.
‘‘(6) AVERAGE
ANNUAL
NET
BACKPAY
AND
FRONTPAY AMOUNT.—The term ‘average annual net
backpay and frontpay amount’ means the amount
equal to—