[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1985 Introduced in House (IH)]






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 protection laws and to allow income averaging for amounts 
                        received as lost income.

    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 ``Federal Whistleblower Protection Tax 
Act of 2005''.

SEC. 2. EXCLUSION FROM GROSS INCOME FOR CERTAIN AMOUNTS RECEIVED ON 
              ACCOUNT OF FEDERAL WHISTLEBLOWER PROTECTION LAWS.

    (a) In General.--Subsection (a) of section 104 of the Internal 
Revenue Code of 1986 (relating to compensation 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 inserting 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 extent the taxpayer 
                elects not to claim any deduction 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 averaging) is amended by adding 
        at the end the following new section:

``SEC. 1302. AVERAGING OF WHISTLEBLOWER LOST INCOME.

    ``(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 taxable income 
        reduced by elected whistleblower lost income, 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 attributable 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 income.--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 damages 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 income 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.''.
            (3) Clerical amendment.--The table of sections for such 
        part I is amended by adding at the end the following new item:

``Sec. 1302. Averaging of whistleblower lost income.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect as if included in the amendments made by section 1605 of the 
Small Business Job Protection Act of 1996.
    (d) Waiver of Statute of Limitations.--If refund or credit of any 
overpayment of tax resulting from the amendment made by subsection (a) 
or (b) is prevented at any time before the close of the 1-year period 
beginning on the date of the enactment of this Act by the operation of 
any law or rule of law (including res judicata), refund or credit of 
such overpayment (to the extent attributable to such amendment) may, 
nevertheless, be made or allowed if claim therefor is filed before the 
close of such 1-year period.
                                 <all>