SEC. 2. EXCLUSION FOR WRONGFULLY INCARCERATED IN-
DIVIDUALS. 
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 is amended 
by inserting after section 139B the following new section: 
‘‘SEC. 139C. CERTAIN AMOUNTS RECEIVED BY WRONG-
FULLY INCARCERATED INDIVIDUALS. 
‘‘(a) EXCLUSION FROM GROSS INCOME.—Gross in-
come shall not include— 
‘‘(1) in the case of any wrongfully incarcerated 
individual, any civil damages, restitution, or other 
monetary award (including compensatory or statu-
tory damages and restitution imposed in a criminal 
matter) relating to the incarceration of such indi-
vidual for the covered offense for which such indi-
vidual was convicted, and 
‘‘(2) in the case of a qualified wrongfully incar-
cerated individual, the first $50,000 of income re-
ceived by such individual in any taxable year begin-
ning after December 31, 2007. 
‘‘(b) LIMITATION RELATING
TO INCOME EXCLU-
SION.— 
‘‘(1) IN GENERAL.—The exclusion under sub-
section (a)(2) shall not apply to any qualified wrong-
fully incarcerated individual for any taxable year 
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other than a taxable year in the qualified benefit pe-
riod with respect to such individual. 
‘‘(2) QUALIFIED BENEFIT PERIOD.—For pur-
poses of paragraph (1), the term ‘qualified benefit 
period’ means, with respect to any qualified wrong-
fully incarcerated individual, the first 15 taxable 
years ending after the first date on which such indi-
vidual is a wrongfully incarcerated individual. 
‘‘(3) LIMITATION BASED ON YEARS OF INCAR-
CERATION.—In the case of a qualified wrongfully in-
carcerated individual who served a sentence of im-
prisonment of less than 15 years for the covered of-
fense with respect to which such individual is a 
qualified wrongfully incarcerated individual, the 
number of full years that such individual was so im-
prisoned shall be substituted for ‘15’ in paragraph 
(2). 
‘‘(4) TERMINATION OF EXCLUSION UPON CON-
VICTION OF SUBSEQUENT OFFENSE.—If a qualified 
wrongfully incarcerated individual is convicted of a 
criminal offense under Federal or State law that is 
punishable by more than 1 year imprisonment at 
any time during the qualified benefit period, sub-
section (a)(2) shall not apply to the taxable year 
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which includes the date of such conviction and all 
subsequent taxable years. 
‘‘(c) WRONGFULLY INCARCERATED INDIVIDUAL.— 
For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘wrongfully incar-
cerated individual’ means an individual— 
‘‘(A) who was convicted of a covered of-
fense, 
‘‘(B) who served all or part of a sentence 
of imprisonment relating to that covered of-
fense, and 
‘‘(C)(i) who was pardoned, granted clem-
ency, or granted amnesty for that covered of-
fense because that individual was innocent of 
that covered offense, or 
‘‘(ii)(I) for whom the judgment of convic-
tion for that covered offense was reversed or va-
cated, and 
‘‘(II) for whom the indictment, informa-
tion, or other accusatory instrument for that 
covered offense was dismissed or who was found 
not guilty at a new trial after the judgment of 
conviction for that covered offense was reversed 
or vacated. 
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‘‘(2) COVERED OFFENSE.—The term ‘covered 
offense’ means any criminal offense under Federal 
or State law, and includes any criminal offense aris-
ing from the same course of conduct as that crimi-
nal offense. 
‘‘(d) QUALIFIED WRONGFULLY INCARCERATED INDI-
VIDUAL.—For purposes of this section, the term ‘qualified 
wrongfully incarcerated individual’ means a wrongfully in-
carcerated individual who, except for the covered offense 
described in subsection (c)(1)(A), has never been convicted 
of a criminal offense (other than a juvenile offense) under 
Federal or State law that is punishable by more than 1 
year imprisonment. 
‘‘(e) REPORTING REQUIREMENTS.—For purposes of 
this section and section 36, the Secretary to impose such 
reporting requirements as the Secretary determines nec-
essary or appropriate to carry out this section, including 
a requirement that the individual include with the return 
of tax for the taxable year a statement or attestation that 
the individual has not been subsequently convicted of a 
crime within the meaning of subsection (b)(4).’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions for part III of subchapter B of chapter 1 of the In-
ternal Revenue Code of 1986 is amended by inserting 
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after the item relating to section 139B the following new 
item: 
‘‘Sec. 139C. Certain amounts received by wrongfully incarcerated individuals.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning before, 
on, or after the date of the enactment of this Act. 
SEC. 3. REFUNDABLE CREDIT FOR EMPLOYMENT TAXES 
PAID BY WRONGFULLY INCARCERATED INDI-
VIDUALS. 
(a) ALLOWANCE OF REFUNDABLE CREDIT.—Sub-
part C of part IV of subchapter A of chapter 1 of the 
Internal Revenue Code of 1986 (relating to refundable 
credits) is amended by redesignating section 36 as section 
37 and by inserting after section 35 the following new sec-
tion: 
‘‘SEC. 36. EMPLOYMENT TAXES OF WRONGFULLY INCAR-
CERATED INDIVIDUALS. 
‘‘(a) IN GENERAL.—In the case of a qualified wrong-
fully incarcerated individual, there shall be allowed as a 
credit against the tax imposed by this subtitle for the tax-
able year an amount equal to the sum of— 
‘‘(1) 50 percent of the taxes imposed on the 
self-employment income of such individual under 
subsections (a) and (b) of section 1401 during the 
taxable year, plus 
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‘‘(2) the taxes imposed on the wages received by 
such individual with respect to employment under 
subsections (a) and (b) of section 3101 during the 
taxable year. 
‘‘(b) LIMITATIONS.— 
‘‘(1) DOLLAR LIMITATION.—The total amount 
of wages and self-employment income taken into ac-
count under subsection (a) with respect to any indi-
vidual for any taxable year shall not exceed $50,000. 
‘‘(2) TAXABLE YEAR LIMITATION.—The credit 
under subsection (a) shall not be allowed to any 
qualified wrongfully incarcerated individual for any 
taxable year other than a taxable year in the quali-
fied benefit period determined with respect to such 
individual under paragraphs (2) and (3) of section 
139C(b). 
‘‘(3) TERMINATION OF CREDIT UPON CONVIC-
TION
OF
SUBSEQUENT
OFFENSE.—If a qualified 
wrongfully incarcerated individual is convicted of a 
criminal offense under Federal or State law that is 
punishable by more than 1 year imprisonment at 
any time during the qualified benefit period (as so 
determined), subsection (a) shall not apply to the 
taxable year which includes the date of such convic-
tion and all subsequent taxable years. 
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‘‘(c) QUALIFIED WRONGFULLY INCARCERATED INDI-
VIDUAL.—For purposes of this section, the term ‘qualified 
wrongfully incarcerated individual’ has the meaning given 
to such term under section 139C(d). 
‘‘(d) REFERENCE.—For reporting requirement, see 
section 139C(e).’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Section 1324(b)(2) of title 31, United 
States Code, is amended by inserting ‘‘, 36,’’ after 
‘‘35,’’. 
(2) The table of sections for subpart C of part 
IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by striking the item 
relating to section 36 and inserting the following: 
‘‘Sec. 36. Employment taxes of wrongfully incarcerated individuals. 
‘‘Sec. 37. Overpayments of tax.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2007. 
Æ 
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