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 insert-
ing 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 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—