I 
109TH CONGRESS 
1ST SESSION H. R. 1985
To amend the Internal Revenue Code of 1986 to exclude from gross income 
amounts received as damages and attorneys fees and costs under Federal 
whistleblower protection laws and to allow income averaging for amounts 
received as lost income. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 28, 2005
Mr. GERLACH (for himself, Mr. HOLDEN, and Ms. GRANGER) 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 as damages and 
attorneys fees and costs under Federal whistleblower pro-
tection laws and to allow income averaging for amounts 
received as lost income.
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 ‘‘Federal Whistleblower 
Protection Tax Act of 2005’’.
SEC. 2. EXCLUSION FROM GROSS INCOME FOR CERTAIN 
AMOUNTS RECEIVED ON ACCOUNT OF FED-
ERAL WHISTLEBLOWER PROTECTION LAWS. 
(a) IN GENERAL.—Subsection (a) of section 104 of 
the Internal Revenue Code of 1986 (relating to compensa-
tion for injuries or sickness) is amended by striking ‘‘and’’ 
at the end of paragraph (4), by striking the period at the 
end of paragraph (5) and inserting ‘‘; and’’, and by insert-
ing after paragraph (5) the following new paragraph: 
‘‘(6) in the case of a claim under any provision 
of Federal law (popularly known as whistleblower 
protection provisions) 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 
permitted under Federal law—
‘‘(A) the amount of any damages (other 
than punitive damages and other than damages 
on account of lost income), and 
‘‘(B) the amount awarded for attorneys 
fees and costs in pursuing such claim to the ex-
tent the taxpayer elects not to claim any deduc-
tion for such fees and costs.’’. 
(b) AVERAGING OF LOST INCOME.—
(1) IN GENERAL.—Part I of subchapter Q of 
chapter 1 of such Code (relating to income aver-
aging) is amended by adding at the end the fol-
lowing new section: 
‘‘SEC. 1302. AVERAGING OF WHISTLEBLOWER LOST IN-
COME. 
‘‘(a) IN GENERAL.—In the case of an individual who 
receives a whistleblower award during any taxable year, 
the tax imposed by section 1 for such taxable year shall 
be equal to the sum of—
‘‘(1) a tax computed under such section on tax-
able income reduced by elected whistleblower lost in-
come, plus 
‘‘(2) the increase in tax imposed by section 1 
which would result if taxable income for each of the 
taxable years to which such income is attributable 
were increased by the amount of such income attrib-
utable to such year. 
Any adjustment under this section for any taxable year 
shall be taken into account in applying this section for 
any subsequent taxable year. 
‘‘(b) DEFINITIONS.—For purposes of this section—
‘‘(1) 
WHISTLEBLOWER
AWARD.—The 
term 
‘whistleblower award’ means any amount which is 
excluded from gross income under paragraph (6) of 
section 104(a).
‘‘(2) ELECTED
WHISTLEBLOWER
LOST
IN-
COME.—The term ‘elected whistleblower lost income’ 
means income—
‘‘(A) which would be excluded from gross 
income under such paragraph if such paragraph 
were applied without regard to ‘other than dam-
ages on account of lost income’, and 
‘‘(B) which is specified in the election 
under subsection (a). 
If the election under subsection (a) applies to less 
than all such income, such election shall be treated 
as applying to a ratable portion of each year’s in-
come for purposes of subsection (a)(2). 
‘‘(c) REGULATIONS.—The regulations under section 
1301(c) shall apply for purposes of this section.’’. 
(2) CONFORMING AMENDMENT.—Subsection (c) 
of section 55 (defining regular tax) is amended by 
redesignating paragraph (3) as paragraph (4) and 
by inserting after paragraph (2) the following new 
paragraph: 
‘‘(3) COORDINATION WITH INCOME AVERAGING 
FOR
WHISTLEBLOWER
LOST
INCOME.—Solely for 
purposes of this section, section 1302 (relating to 
averaging of whistleblower lost income) shall not 
apply in computing the regular tax liability.’’.