Civil Rights Tax Relief Act of 2003 (Introduced in Senate)

S 557 IS

To amend the Internal Revenue Code of 1986 to exclude from gross income amounts received on account of claims based on certain unlawful discrimination and to allow income averaging for backpay and frontpay awards received on account of such claims, and for other purposes.

Ms. COLLINS (for herself, Mr. GRASSLEY, Mr. BINGAMAN, Mr. COCHRAN, Mr. DASCHLE, Mr. SARBANES, and Mr. SMITH) introduced the following bill; which was read twice and referred to the Committee on Finance

To amend the Internal Revenue Code of 1986 to exclude from gross income amounts received on account of claims based on certain unlawful discrimination and to allow income averaging for backpay and frontpay awards received on account of such claims, and for other purposes.

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 `Civil Rights Tax Relief Act of 2003'.

SEC. 2. EXCLUSION FROM GROSS INCOME FOR AMOUNTS RECEIVED ON ACCOUNT OF CERTAIN UNLAWFUL DISCRIMINATION.

(a) IN GENERAL- Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to items specifically excluded from gross income) is amended by redesignating section 140 as section 140A and by inserting after section 139 the following new section:

`SEC. 140. AMOUNTS RECEIVED ON ACCOUNT OF CERTAIN UNLAWFUL DISCRIMINATION.

`(a) IN GENERAL-

`(1) EXCLUSION- Gross income does not include 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 National Labor Relations Act (29 U.S.C. 151 et seq.).

`(4) The Fair Labor Standards Act of 1938 (29 U.S.C. 201 et seq.).

`(5) Section 4 or 15 of the Age Discrimination in Employment Act of 1967 (29 U.S.C. 623 or 633a).

`(6) Section 501 or 504 of the Rehabilitation Act of 1973 (29 U.S.C. 791 or 794).

`(7) Section 510 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1140).

`(8) Title IX of the Education Amendments of 1972 (29 U.S.C. 1681 et seq.).

`(9) The Employee Polygraph Protection Act of 1988 (29 U.S.C. 201 et seq.).

`(10) The Worker Adjustment and Retraining Notification Act (29 U.S.C. 2102 et seq.).

`(11) Section 105 of the Family and Medical Leave Act of 1993 (29 U.S.C. 2615).

`(12) Chapter 43 of title 38, United States Code (relating to employment and reemployment rights of members of the uniformed services).

`(13) Section 1977, 1979, or 1980 of the Revised Statutes (42 U.S.C. 1981, 1983, or 1985).

`(14) Section 703, 704, or 717 of the Civil Rights Act of 1964 (42 U.S.C. 2000e-2, 2000e-3, or 2000e-16).

`(15) Section 804, 805, 806, 808, or 818 of the Fair Housing Act (42 U.S.C. 3604, 3605, 3606, 3608, or 3617).

`(16) Section 102, 202, 302, or 503 of the Americans with Disabilities Act of 1990 (42 U.S.C. 12112, 12132, 12182, or 12203).

`(17) 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.

`(18) Any provision of State or local law, or common law claims permitted under Federal, State, or local law--

`(A) providing for the enforcement of civil rights, or

`(B) regulating any aspect of the employment relationship, including 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 by law.'.

(b) CLERICAL AMENDMENT- The table of sections for part III of subchapter B of chapter 1 of such Code is amended by striking the last item and inserting the following:

`Sec. 140. Amounts received on account of certain unlawful discrimination.

`Sec. 140. Cross references to other Acts.'

(c) EFFECTIVE DATE- The amendments 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 AVERAGING FOR BACKPAY AND FRONTPAY 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 BACKPAY AND FRONTPAY RECEIVED ON ACCOUNT OF CERTAIN UNLAWFUL 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 taxable 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 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 number of years in the backpay period and frontpay period, and

`(B) the amount by which the tax determined under paragraph (1) would increase if the amount on which such tax is determined were increased by the average annual net backpay and frontpay amount.

`(b) DEFINITIONS- For purposes of this section--

`(1) EMPLOYMENT DISCRIMINATION BACKPAY OR FRONTPAY- The term `employment discrimination backpay or frontpay' means backpay or frontpay receivable (whether as lump sums or periodic payments) on account of a claim of unlawful employment discrimination.

`(2) UNLAWFUL EMPLOYMENT DISCRIMINATION- The term `unlawful employment discrimination' has the meaning provided the term `unlawful discrimination' in section 140(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 performed but for a claimed violation of law, as an employee, former employee, or prospective employee before such taxable year for the taxpayer's employer, former employer, or prospective employer; and

`(ii) in the case of frontpay, to employment that would have been performed but for a claimed violation of law, in a taxable year or taxable years following the taxable year; and

`(B) which are--

`(i) ordered, recommended, or approved by any governmental entity to satisfy a claim for a violation of law, or

`(ii) received from the settlement of such a claim.

`(4) BACKPAY PERIOD- The term `backpay period' 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 period 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 backpay and frontpay, over

`(ii) the amount of deductions that would have been allowable but for subsection (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 UNLAWFUL EMPLOYMENT DISCRIMINATION NOT TO INCREASE ALTERNATIVE MINIMUM TAX LIABILITY.

(a) IN GENERAL- Section 55(c) of the Internal Revenue Code of 1986 (defining regular tax) is amended by redesignating paragraph (2) as paragraph (3) and by inserting after paragraph (1) the following:

`(2) COORDINATION WITH INCOME AVERAGING FOR AMOUNTS RECEIVED ON ACCOUNT OF EMPLOYMENT DISCRIMINATION- Solely for purposes of this section, section 1302 (relating to averaging of income 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.