‘‘(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, 2000.
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, 2000.
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