Title: EMPOWER Act - Part 2
Policy area: Taxation

Summary:
Ending the Monopoly of Power Over Workplace Harassment through Education and Reporting Act - Part 2 or the EMPOWER Act - Part 2
This bill amends the Internal Revenue Code to modify the tax treatment of expenses and payments related to workplace harassment and employment discrimination.
The bill prohibits a tax deduction for amounts paid or incurred by the taxpayer:
The bill also: (1) excludes from gross income amounts received in connection with a judgment, award, or settlement related to workplace harassment, including sexual harassment or other unlawful discrimination; and (2) limits the taxation of and the application of the alternative minimum tax to compensation received under a settlement or judgment for employment discrimination.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 2988 Introduced in Senate (IS)]

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115th CONGRESS
  2d Session
                                S. 2988

To amend the Internal Revenue Code of 1986 to modify the tax treatment 
 of amounts related to employment discrimination and harassment in the 
workplace, including sexual harassment, sexual assault, and harassment 
                     based on protected categories.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              June 5, 2018

  Ms. Harris (for herself and Ms. Murkowski) introduced the following 
  bill; which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to modify the tax treatment 
 of amounts related to employment discrimination and harassment in the 
workplace, including sexual harassment, sexual assault, and harassment 
                     based on protected categories.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Ending the Monopoly of Power Over 
Workplace Harassment through Education and Reporting Act - Part 2'' or 
the ``EMPOWER Act - Part 2''.

SEC. 2. TAX TREATMENT OF AMOUNTS RELATED TO JUDGMENTS.

    (a) Denial of Deduction.--
            (1) In general.--Part IX of subchapter B of chapter 1 of 
        the Internal Revenue Code of 1986 is amended by adding at the 
        end the following new section:

``SEC. 280I. AMOUNTS RELATED TO JUDGMENTS WITH RESPECT TO WORKPLACE 
              HARASSMENT, INCLUDING SEXUAL HARASSMENT.

    ``No deduction shall be allowed under this chapter for amounts paid 
or incurred by the taxpayer--
            ``(1) pursuant to any judgment or award in litigation 
        related to workplace harassment, including sexual harassment, 
        or
            ``(2) for expenses and attorney's fees in connection with 
        the litigation resulting in the judgment or award described in 
        paragraph (1) (other than expenses or attorney's fees paid by 
        the workplace harassment plaintiff or claimant), or for any 
        insurance covering the defense or liability of the underlying 
        claims with respect to such litigation.''.
            (2) Clerical amendment.--The table of sections for part IX 
        of subchapter B of chapter 1 of such Code is amended by adding 
        at the end the following new item:

``Sec. 280I. Amounts related to judgments with respect to workplace 
                            harassment, including sexual harassment.''.
            (3) Conforming amendment.--Section 162 of such Code is 
        amended by striking subsection (q).
            (4) Effective date.--The amendments made by this subsection 
        shall apply to amounts paid or incurred in taxable years 
        beginning after the date of the enactment of this Act.
    (b) Exclusion From Income.--
            (1) In general.--Part III of subchapter B of chapter 1 of 
        the Internal Revenue Code of 1986 is amended by inserting after 
        section 139G the following new section:

``SEC. 139H. AMOUNTS RECEIVED IN CONNECTION WITH JUDGMENTS, AWARDS, AND 
              SETTLEMENTS WITH RESPECT TO WORKPLACE HARASSMENT.

    ``Gross income shall not include any amount received in connection 
with a judgment or award in, or a settlement of--
            ``(1) a claim related to workplace harassment, including 
        sexual harassment or other unlawful discrimination, or
            ``(2) any other claim of unlawful discrimination (as 
        defined by section 62(e)).
The preceding sentence shall not include any employment discrimination 
compensation to which section 1302 applies.''.
            (2) 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 139G the following 
        new item:

``Sec. 139H. Amounts received in connection with judgments, awards, or 
                            settlements with respect to workplace 
                            harassment.''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to amounts received in taxable years beginning 
        after the date of the enactment of this Act.

SEC. 3. LIMITATION ON TAX BASED ON INCOME AVERAGING FOR COMPENSATION 
              RECEIVED ON ACCOUNT OF CERTAIN UNLAWFUL EMPLOYMENT 
              DISCRIMINATION.

    (a) In General.--Part I of subchapter Q of chapter 1 of the 
Internal Revenue Code of 1986 (relating to income averaging) is amended 
by adding at the end the following new section:

``SEC. 1302. INCOME FROM COMPENSATION RECEIVED ON ACCOUNT OF CERTAIN 
              UNLAWFUL EMPLOYMENT DISCRIMINATION.

    ``(a) General Rule.--In the case of any employment discrimination 
compensation received during any taxable year, the tax imposed by this 
chapter for such taxable year with respect to such compensation shall 
not exceed the sum of--
            ``(1) the tax which would be so imposed if--
                    ``(A) no amount of such compensation were included 
                in gross income for such year, and
                    ``(B) no deduction were allowed for such year for 
                expenses otherwise allowable as a deduction to the 
                taxpayer for such year in connection with making or 
                prosecuting any claim of unlawful employment 
                discrimination by or on behalf of the taxpayer, plus
            ``(2) the product of--
                    ``(A) the combined number of years in the backpay 
                period and the foregone compensation period, and
                    ``(B) the amount by which the tax determined under 
                paragraph (1) would increase if the sum of--
                            ``(i) the average of the average annual net 
                        employment discrimination compensation in the 
                        backpay period, and
                            ``(ii) the average of the average annual 
                        net employment discrimination compensation in 
                        the foregone compensation period,
                were included in gross income for such year.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Employment discrimination compensation.--The term 
        `employment discrimination compensation' means any backpay or 
        foregone compensation receivable (whether as lump sums or 
        periodic payments) on account of a judgment or settlement 
        resulting from a claim of unlawful discrimination (as defined 
        in section 62(e)) in violation of law which relates to 
        employment.
            ``(2) Backpay.--The term `backpay' means amounts which are 
        includible in gross income for the taxable year as compensation 
        which is attributable to services performed (or which would 
        have been performed but for the violation of law described in 
        paragraph (1)) as an employee, former employee, or prospective 
        employee in years before such taxable year for the taxpayer's 
        employer, former employer, or prospective employer.
            ``(3) Foregone compensation.--The term `foregone 
        compensation' means amounts which are includible in gross 
        income for the taxable year as compensation which is 
        attributable to services which would have been performed in 
        years after such taxable year but for the violation of law 
        described in paragraph (1).
            ``(4) Backpay period.--The term `backpay period' means the 
        period during which services described in paragraph (2) were 
        performed or would have been performed but for the violation of 
        law described in paragraph (1). 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) Foregone compensation period.--The term `foregone 
        compensation period' means the period during which services 
        described in paragraph (3) would have been performed but for 
        the violation of law described in paragraph (1). 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.
            ``(6) Average annual net employment discrimination 
        compensation.--The term `average annual net employment 
        discrimination compensation' with respect to any period means 
        the amount equal to--
                    ``(A) the excess of--
                            ``(i) employment discrimination 
                        compensation attributable to such period, over
                            ``(ii) the amount of the deductions 
                        described in subsection (a)(1)(B), divided by
                    ``(B) the total number of years in the backpay 
                period and the foregone compensation period.''.
    (b) Clerical Amendment.--The table of sections for part I of 
subchapter Q of chapter 1 of the Internal Revenue Code of 1986 is 
amended by inserting after section 1301 the following new item:

``Sec. 1302. Income from compensation received on account of certain 
                            unlawful employment discrimination.''.
    (c) Income Averaging Not To Increase Alternative Minimum Tax 
Liability.--Section 55(c) of the Internal Revenue Code of 1986 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 amounts 
        received on account of employment discrimination.--Solely for 
        purposes of this section, section 1302 shall not apply in 
        computing the regular tax liability.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after the 
date of the enactment of this Act.
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