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 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 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 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,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Civil Rights Tax Fair-
ness Act of 1999’’.
SEC. 2. EXCLUSION FROM GROSS INCOME FOR AMOUNTS
RECEIVED ON ACCOUNT OF CERTAIN UNLAW-
FUL DISCRIMINATION.
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 (relating to
items specifically excluded from gross income) is amended
by redesignating section 139 as section 140) and by in-
serting after section 138 the following new section:
‘‘SEC. 139. AMOUNTS RECEIVED ON ACCOUNT OF CERTAIN
UNLAWFUL DISCRIMINATION.
‘‘(a) IN GENERAL.—
‘‘(1) EXCLUSION.—Gross income does not in-
clude amounts received by a claimant (whether by
suit or agreement and whether as lump sums or
periodic payments) on account of a claim of unlawful
discrimination.
‘‘(2) AMOUNTS COVERED.—For purposes of
paragraph (1), the term ‘amounts’ does not
include—
‘‘(A) backpay or frontpay, as defined in
section 1302(b), or
‘‘(B) punitive damages.
‘‘(b) UNLAWFUL DISCRIMINATION DEFINED.—For
purposes of this section, the term ‘unlawful discrimination’
means an act that is unlawful under any of the following:
‘‘(1) Section 302 of the Civil Rights Act of
1991 (2 U.S.C. 1202).
‘‘(2) Section 201, 202, 203, 204, 205, 206, or
207 of the Congressional Accountability Act of 1995
(2 U.S.C. 1311, 1312, 1313, 1314, 1315, 1316, or
1317)
‘‘(3) The Fair Labor Standards Act of 1938
(29 U.S.C. 201 et seq.).
‘‘(4) Section 4 or 15 of the Age Discrimination
in Employment Act of 1967 (29 U.S.C. 623 or
633a).
‘‘(5) Section 501 or 504 of the Rehabilitation
Act of 1973 (29 U.S.C. 791 or 794).
‘‘(6) Section 510 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1140).
‘‘(7) Title IX of the Education Amendments of
1972 (29 U.S.C. 1681 et seq.).
‘‘(8) The Employee Polygraph Protection Act of
1988 (29 U.S.C. 201 et seq.).
‘‘(9) The Worker Adjustment and Retraining
Notification Act (29 U.S.C. 2102 et seq.).
‘‘(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, regulating any aspect of the employment re-
lationship, or prohibiting the discharge of an em-
ployee, the discrimination against an employee, or
any other form of retaliation or reprisal against an
employee for asserting rights or taking other actions
permitted 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, 1998.
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:
‘‘(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—
‘‘(A) the excess of—
‘‘(i) employment discrimination back-
pay and frontpay, over
‘‘(ii) the amount of deductions that
would have been allowable but for sub-
section (a)(1)(B), divided by
‘‘(B) the number of years in the backpay
period and frontpay period.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for part I of subchapter Q of chapter 1 of such Code is
amended by inserting after section 1301 the following new
item:
‘‘Sec. 1302. Income from backpay or frontpay received on account
of certain unlawful employment discrimination.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to amounts received in taxable
years beginning after December 31, 1998.
SEC. 3. INCOME AVERAGING FOR BACKPAY AND FRONTPAY
RECEIVED ON ACCOUNT OF CERTAIN UNLAW-
FUL EMPLOYMENT DISCRIMINATION NOT TO
INCREASE ALTERNATIVE MINIMUM TAX LI-
ABILITY.
(a) IN GENERAL.—Section 55(c) of the Internal Rev-
enue Code of 1986 (defining regular tax) is amended by
redesignating paragraph (2) as paragraph (3) and by in-
serting after paragraph (1) the following:
‘‘(2) COORDINATION WITH INCOME AVERAGING
FOR AMOUNTS RECEIVED ON ACCOUNT OF EMPLOY-
MENT DISCRIMINATION.—Solely for purposes of this
section, section 1302 (relating to averaging of in-
come from backpay or frontpay received on account
of certain unlawful employment discrimination) shall
not apply in computing the regular tax.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1998.
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