[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 557 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                 S. 557

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.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 6, 2003

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

_______________________________________________________________________

                                 A BILL


 
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.
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