[Congressional Record Volume 146, Number 93 (Tuesday, July 18, 2000)]
[Senate]
[Pages S7160-S7164]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. LOTT:
S. 2883. A bill to suspend temporarily the duty on piano plates; to
the Committee on Finance.
temporary suspension of duty on piano plates
Mr. LOTT. Mr. President, I rise today to introduce legislation
temporarily suspending duties on imports of certain piano plates. This
legislation is needed to address a difficult situation facing the
domestic piano industry.
A piano plate is an essential part of a piano. It is the iron casting
over which the strings are stretched and tuned by pins inserted in the
plate. Baldwin Piano & Organ Company, which employs more than 600
workers in the production of pianos in Arkansas and Mississippi, is one
of a diminishing number of piano producers in the United States. Piano
plates are produced in the United States by a single company, a
competitor of Baldwin, whose production is for the most part captively
consumed. As such, Baldwin lacks a domestic source for piano plates,
other than the surplus production of one of its competitors. Due to its
own demand for plates, Baldwin's competitor cannot meet Baldwin's
requirements.
Mr. President the history and recent contraction in the domestic
piano industry points to the critical need for this legislation.
Indeed, were the production of Baldwin or other domestic producers to
be curtailed due to the insufficient availability of domestically-
produced piano plates, it is likely that this would engender an
increase in foreign piano supply, rather than an increase in market
share of other domestic producers. This is evident from the fact that,
in the early 1980s, there were 15 domestic piano producers supplying
approximately 80 percent of U.S. consumption, whereas now only nine
domestic producers remain--servicing approximately half, if not less,
of the U.S. market. The domestic piano industry is well aware that
foreign production stands ready to fill any gap in domestic supply.
The legislation I am introducing today would temporarily suspend,
through the year 2004, the rate of duty applicable to imports of piano
plates provided for in subheading 9209.91.80 of the Harmonized Tariff
Schedule of the United States. Currently, the applicable rate of duty
is 4.2 percent ad valorem. If the legislation is approved, the
reduction in duty collection is estimated to be between $300,000 and
$400,000 per year through 2004.
Given the situation currently facing domestic piano producers, it is
unlikely that there will be objection from other domestic manufacturers
to the legislation proposed today. In view of the fact that Baldwin
must resort to imported plates regardless of the duty rate applicable
to such imports, and that no appreciable domestic production of piano
plates will be displaced by imports, suspension of the duty rate will
have no adverse affect upon the domestic industry. This legislation
stands to ensure only that a U.S. piano producer will find a reliable
source of supply for a critical component and thus will be better
positioned to stand with other domestic producers in providing a secure
and stable supply of pianos for the domestic market.
I ask that the text of the bill be printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 2883
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. PIANO PLATES.
(a) In General.--Subchapter II of chapter 99 of the
Harmonized Tariff Schedule of the United States is amended by
inserting in numerical sequence the following new item:
`` 9902.92.09..... Piano plates Free........... No change....... No change....... On or before 12/
(provided for 31/2004........ ''
in subheading .
9209.91.80)....
----------------------------------------------------------------------------------------------------------------
[[Page S7161]]
(b) Effective Date.--The amendment made by this section
shall apply to goods entered, or withdrawn from warehouse for
consumption, on or after the 15th day after the date of
enactment of this Act.
______
By Mr. GRAMS:
S. 2884. A bill to amend the Internal Revenue Code of 1986 to allow
allocation of small ethanol producer credit to patrons of cooperative,
and for other purposes; to the Committee on Finance.
small ethanol producer credit
Mr. GRAMS. Mr. President, I rise today to introduce legislation to
allow farmer-owned cooperatives access to the small ethanol producer
tax credit. Mr. President, current law provides for an income tax
credit of 10 cents per gallon for up to 15 million gallons of annual
ethanol production by a small ethanol producer. A small ethanol
producer is one defined as having a production capacity of less than 30
million gallons per year. The credit was enacted as part of the Omnibus
Budget Reconciliation Act of 1990 and championed by our former
colleague, Senator Bob Dole. Unfortunately, the credit was enacted at a
time when the growth and shape of the ethanol industry was still
difficult to predict.
This situation has led to an unfortunate situation in Minnesota,
Iowa, and in other areas where farmer-owned cooperatives have been
unable to access the credit due to the way in which the original
legislation was drafted. The original legislation certainly envisioned
these small, farmer-owned cooperatives as being eligible for the tax
credit, but the intricacies of the tax code have made it impossible for
them to do so.
Mr. President, there are currently 22 cooperative ethanol plants in
the United States. Twelve of them are located in Minnesota. Eleven of
these Minnesota cooperatives involve over 5,000 farmers and their
families. Minnesota cooperatives are able to produce roughly 189
million gallons of ethanol per year.
My legislation would simply provide a technical correction to ensure
farmer-owned cooperatives are included in the definition of who can
benefit from the small ethanol producer tax credit. My bill also
expands the definition to include facilities with less than 60 million
gallons in annual capacity.
I want to again stress that this proposal is consistent with the
original intent of the 1990 law that created the small ethanol producer
tax credit. Farmer-owned cooperatives were never intended to be
excluded from receiving the benefits of the tax credit if they produce
less than 30 million gallons. It was just hard to envision the role and
growth of cooperatives when we passed the 1990 law. Cooperatives are
not huge corporate ventures, but associations of small farmers.
Mr. President, the ethanol industry in Minnesota and across the
country is one we should promote. Ethanol is a crucial product for
rural America, for our nation as a whole, and especially for Minnesota.
I'd like to point out just a few of ethanol's impressive benefits--
environmentally and economically. According to the Minnesota Corn
Growers, ethanol production boosts nationwide employment by over
195,000 jobs. Ethanol improves our trade balance by $2 billion and adds
$450 million to state tax receipts. It reduces emissions from gasoline
use and therefore helps us clean up the environment.
According to the American Coalition for Ethanol, more than $3 billion
has been invested in 43 ethanol facilities in 20 states. Those
investments have directly created 40,000 jobs and more than $12.6
billion in increased income over the next five years.
Minnesota is now home to over a dozen operating ethanol plants with a
capacity of over 200 million gallons annually. These plants mean new
jobs with good wages and good benefits for people living in rural areas
where these plants are built. According to a report by the Minnesota
Legislative Auditor, those plants, and the resulting economic activity,
are expected to create as many as 5,000 new, high-wage jobs--including
jobs in production, construction, and support industries.
In addition to its positive economic impact, ethanol production
allows our nation to move away from our dependence on foreign energy
sources. The United States Department of Agriculture estimates that for
every gallon of ethanol produced domestically, we displace seven
gallons of imported oil. Ethanol plays a role in increasing our
national energy security by providing a stable, homegrown, renewable
energy supply. Ethanol is estimated to reduce our demand for foreign
oil by 98,000 barrels per day.
Those are just some of the reasons why I urge my colleagues to join
me in allowing small, farmer-owned cooperatives to enjoy the full
benefits of the small ethanol producer tax credit.
I want to thank Senator Charles Grassley of Iowa for working with me
on this important legislation. As everyone knows, Senator Grassley has
been a steadfast leader of efforts to promote tax relief for farmers
and rural Americans. I'm proud to be working with him on this
legislation.
I ask that the full text of my bill be printed in the Record.
There being no objection, the bill was ordered to be printed in the
Record, as follows:
S. 2884
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SMALL ETHANOL PRODUCER CREDIT.
(a) Allocation of Alcohol Fuels Credit to Patrons of a
Cooperative.--Section 40(g) Internal Revenue Code of 1986
(relating to definitions and special rules for eligible small
ethanol producer credit) is amended by adding at the end the
following:
``(6) Allocation of small ethanol producer credit to
patrons of cooperative.--
``(A) Election to allocate.--
``(i) In general.--Notwithstanding paragraph (4), in the
case of a cooperative organization described in section
1381(a), any portion of the credit determined under
subsection (a)(3) for the taxable year may, at the election
of the organization, be apportioned pro rata among patrons of
the organization on the basis of the quantity or value of
business done with or for such patrons for the taxable year.
``(ii) Form and effect of election.--An election under
clause (i) for any taxable year shall be made on a timely
filed return for such year. Such election, once made, shall
be irrevocable for such taxable year.
``(iii) Special rule for 1998 and 1999.--Notwithstanding
clause (ii), an election for any taxable year ending prior to
the date of the enactment of this paragraph may be made at
any time before the expiration of the 3-year period beginning
on the last date prescribed by law for filing the return of
the taxpayer for such taxable year (determined without regard
to extensions) by filing an amended return for such year.
``(B) Treatment of organizations and patrons.--The amount
of the credit apportioned to patrons under subparagraph (A)--
``(i) shall not be included in the amount determined under
subsection (a) with respect to the organization for the
taxable year,
``(ii) shall be included in the amount determined under
subsection (a) for the taxable year of each patron for which
the patronage dividends for the taxable year described in
subparagraph (A) are included in gross income, and
``(iii) shall be included in gross income of such patrons
for the taxable year in the manner and to the extent provided
in section 87.
``(C) Special rules for decrease in credits for taxable
year.--If the amount of the credit of a cooperative
organization (as so defined) determined under subsection
(a)(3) for a taxable year is less than the amount of such
credit shown on the return of the cooperative organization
for such year, an amount equal to the excess of--
``(i) such reduction, over
``(ii) the amount not apportioned to such patrons under
subparagraph (A) for the taxable year,
shall be treated as an increase in tax imposed by this
chapter on the organization. Such increase shall not be
treated as tax imposed by this chapter for purposes of
determining the amount of any credit under this subpart or
subpart A, B, E, or G.''.
(b) Definition of Small Ethanol Producer; Improvements to
Small Ethanol Producer Credit.--
(1) Definition of small ethanol producer.--Section 40(g)(1)
of the Internal Revenue Code of 1986 (relating to eligible
small ethanol producer) is amended by striking ``30,000,000''
and inserting ``60,000,000''.
(2) Small ethanol producer credit not a passive activity
credit.--Clause (i) of section 469(d)(2)(A) of such Code
(relating to passive activity credit) is amended by striking
``subpart D'' and inserting ``subpart D, other than section
40(a)(3),''.
(3) Allowing credit against minimum tax.--
(A) In general.--Subsection (c) of section 38 of such Code
(relating to limitation based on amount of tax) is amended by
redesignating paragraph (3) as paragraph (4) and by inserting
after paragraph (2) the following:
``(3) Special rules for small ethanol producer credit.--
``(A) In general.--In the case of the small ethanol
producer credit--
``(i) this section and section 39 shall be applied
separately with respect to the credit, and
``(ii) in applying paragraph (1) to the credit--
[[Page S7162]]
``(I) subparagraphs (A) and (B) thereof shall not apply,
and
``(II) the limitation under paragraph (1) (as modified by
subclause (I)) shall be reduced by the credit allowed under
subsection (a) for the taxable year (other than the small
ethanol producer credit).
``(B) Small ethanol producer credit.--For purposes of this
subsection, the term `small ethanol producer credit' means
the credit allowable under subsection (a) by reason of
section 40(a)(3).''.
(B) Conforming amendment.--Subclause (II) of section
38(c)(2)(A)(ii) of such Code is amended by inserting ``or the
small ethanol producer credit'' after ``employment credit''.
(4) Small ethanol producer credit not added back to income
under section 87.--Section 87 of such Code (relating to
income inclusion of alcohol fuel credit is amended to read as
follows:
``SEC. 87. ALCOHOL FUEL CREDIT.
``Gross income includes an amount equal to the sum of--
``(1) the amount of the alcohol mixture credit determined
with respect to the taxpayer for the taxable year under
section 40(a)(1), and
``(2) the alcohol credit determined with respect to the
taxpayer for the taxable year under section 40(a)(2).''.
(c) Conforming Amendment.--Section 1388 of the Internal
Revenue Code of 1986 (relating to definitions and special
rules for cooperative organizations) is amended by adding at
the end the following:
``(k) Cross Reference.--For provisions relating to the
apportionment of the alcohol fuels credit between cooperative
organizations and their patrons, see section 40(d) (6).''
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 1997.
(2) Certain provisions.--The amendments made by paragraphs
(1) and (4) of subsection (b) shall apply to taxable years
ending after the date of the enactment of this Act.
______
By Mr. WARNER (for himself and Mr. Robb):
S. 2885. A bill to establish the Jamestown 400th Commemoration
Commission, and for other purposes; to the Committee on Energy and
Natural Resources.
the jamestown 400th commemoration commission act
Mr. WARNER. Mr. President, today I introduce legislation to establish
a federal commission to join the Commonwealth of Virginia in preparing
for the 400th anniversary of the founding of the Jamestown settlement,
the first permanent English settlement in the United States.
In a little more than six years, America will observe one of its most
important anniversaries with the celebration of the Jamestown
quadricentennial. On May 13, 1607, nearly five months after setting
sail from London, a group of 104 English men and boys selected a site
on the banks of Virginia's James River as their new home. Settling
Jamestown was a momentous event in American history.
While the Spanish founded St. Augustine in Florida in the 1560's and
the English attempted to colonize Roanoke Island in North Carolina in
the 1580's, Jamestown was America's first successful, permanent
European settlement. Jamestown is the birthplace of our nation, and is
where representative government in the Americas began. The founding of
Jamestown marks the beginning of what Alex de Toqueville described as
the United States' ``great experiment'' in democracy.
The establishment of Jamestown remains a cornerstone event in
American history because of the lasting traditions that the English
brought with them, including the legacy of language and common law that
have shaped our great republic for decades.
Celebrating the 400th Anniversary of Jamestown marks an important
opportunity to remember and reflect on how our ancestors established
Virginia: how they treated America's original inhabitants, the Indians,
and how the slave trade was begun. While injustice is a major part of
this historical legacy, it is also the legacy that marked the beginning
of our rich cultural heritage that defines the United States today.
With the 2007 celebration we have a chance to properly remember a
story--too often glossed over--of the ``darker side of the Jamestown
legacy'' as one scholar has noted, ``a legacy of slavery; of warfare
and conquest; of the displacement and decimation of Native Americans;
of damage to the natural environment.''
The history of Jamestown is rich, complex, tragic and inspirational.
Certainly, an important part of Jamestown's history is the beginning of
the distinct American spirit of exploration and adventure. The
Jamestown adventure led directly to the formation of the great American
principles of rule of law, religious and political freedom and the
rights of man. The establishment of these pillars of American
government was, again, unique in the history of man and government. The
United States stands today as the world's longest lived, continuous
democratic republic in existence today.
The Jamestown story is also the story of the beginning of truly
global commerce. Not only was the establishment of Jamestown a
commercial venture, it was a venture that coincided with an emerging
worldwide capitalism. The landing was one of many efforts by primarily
western European countries to go beyond a country's boundaries in
search of commercially important natural resources.
The English came to Virginia looking for economic gain, but found
personal freedom. They quickly found that the British model of
government was not well-suited to the challenges of the New World.
Americans have joined in celebrating Jamestown's founding with major
events during the past two centuries, most recently in 1957. These
occasions have been marked with parades to an eight-month international
exposition.
The 2007 Jamestown celebration will allow us to learn from our past
as we prepare for the future. It is a national event that deserves our
national attention and commemoration. The commission will bring the
many talents of noted historians and scholars together with the
Commonwealth's plans to fully observe the Jamestown experiment and its
lasting contributions to our society.
Mr. ROBB. Mr. President, I want to join my senior colleague today in
introducing legislation that will establish a Federal commission to
commemorate the founding of the English colony at Jamestown nearly 400
years ago. Jamestown, the first permanent English Colony in the new
world, holds enormous significance for us as a nation. We are an
English speaking nation and our laws are based on English law. The
history of Jamestown is the earliest history of the United States, and
our culture still reflects those beginnings.
Jamestown was the capitol of Virginia for 92 years and was the center
of cultural activity for the new colony. The celebration of the 400th
anniversary of the founding of Jamestown is important to Virginia, and
the Nation. In order to ensure that the celebration be conducted in a
way that all Americans can appreciate and share in the history of
Jamestown, we propose to establish a federal commission that will
assist in developing federal activities that will complement those
programs and activities undertaken by the Commonwealth of Virginia.
Currently the Commonwealth of Virginia and the federal government,
through the Department of Interior, work together at Jamestown to tell
the story of the early colonial times. The commission will provide
additional assistance, and coordination and will provide support for
the scholarly research that is ongoing at the Jamestown site. The
commission can help ensure that the celebration of our earliest history
is accessible to a broad range of Americans, and not just those in the
immediate vicinity of the original colony.
The authority for the Commission will terminate one year after the
Jamestown celebration in 2007 and after completing a report on its
activities. The report will not only tell the story of the Jamestown
celebration, but will provide guideposts and information for national
celebrations in the future. Having an end to the commission's work will
ensure that the organization will not outlive its usefulness. The
planning for this wonderful celebration has already begun, and so I ask
for quick consideration of this legislation so that we can move forward
together.
______
By Mr. GRASSLEY (for himself, Mr. Robb, Ms. Collins, and Mr.
Daschle):
S. 2887. 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
[[Page S7163]]
frontpay awards received on account of such claims, and for other
purposes.
CIVIL RIGHTS TAX FAIRNESS ACT OF 2000
Mr. GRASSLEY. Mr. President, I rise today to introduce the Civil
Rights Tax Fairness Act of 2000. I am being joined by Senator Robb in
this effort. Civil rights legislation has been in force throughout this
country for nearly thirty years; its purpose being to provide real
remedies to victims of discrimination.
The Civil Rights Tax Fairness Act restores certain remedies for
victims of discrimination by eliminating taxes on emotional distress
awards. This tax was incorporated into the Small Business Job
Protection Act of 1996, making the taxation of awards received in
discrimination cases involving back wages or non-physical injuries (
including emotional distress) taxable. The result of the 1996
legislation was to discriminate against people involved in civil rights
cases. People who received damage awards because of a bar-room brawl or
slip-and-fall incident, often caused by simple negligence, get tax free
awards. While, for similar types of psychological injuries caused by
intentional discrimination the damages are taxed. The result of this
taxation is that the attorneys and government make out better than the
victims who had their rights violated.
A second part of The Civil Rights Tax Fairness Act changes the
current law, which requires people who receive back pay awards in
discrimination cases to be bumped up into a higher tax bracket. When
back pay awards are received by a person in a case the IRS considers it
taxable income to be taxed in the year it is received, even though the
award received covers many years of lost wages. Currently no averaging
of back pay awards is allowed, but The Civil Rights Tax Fairness Act
attempts to address this problem. The act provides for income averaging
of back pay awards, making it possible for the award to be taxed over
the number of years it was meant to compensate.
The third area that The Civil Rights Fairness Act attempts to combat
is the double taxation of attorneys' fees that takes place under
current law. Presently individuals who receive awards end up having to
include in that award their attorneys' fee. This fee can end up being
larger than the actual award received by the plaintiff. The current tax
implications in the law require the plaintiff to pay taxes on their
award and on the attorneys fees received by their lawyer.
One real life example recently brought to my attention involves an
Iowa citizen named Don Lyons. Mr. Lyons, a man attempting to do the
honorable thing by helping out a co-worker with filing a sex
discrimination complaint against their employer, was unjustly
retaliated against. After prevailing in court and receiving a $15,000
remitted judgment, Mr. Lyons then had to deal with the present tax
laws, which not only devoured his judgment, but required him to
actually pay thousands of more dollars to the government in taxes.
First, Mr. Lyons had to pay taxes on the $15,000 he received as
punitive damages from his employer. After he pays his taxes he is left
with $9,533. However, when Mr. Lyons takes into account the taxes that
he has to pay on the combination of his settlement and attorneys' fees,
he ends up owing $67,791 in taxes. When you subtract the $9,533 Mr.
Lyons had left from the initial judgment he ends up still owing the
government $58,236 in taxes. Mr. Lyons attorney, Ms. Victoria L.
Herring, also has to pay taxes on the fee she received for taking Mr.
Lyons case. Mr. Lyons ends up paying taxes on money that he never even
received, making him a good example of why it is important to pass The
Civil Rights Tax Fairness Act and end double taxation. Everyone should
agree that this is a extreme example of unfair taxation.
Mr. Lyons helped out a co-worker, was attacked by his employer, and
received damages in a court of law. People count on the legal system to
protect them and when their civil rights are violated the system needs
to function properly. It is disheartening to learn that, in actuality,
Mr. Lyons is going to be taken to the cleaners by the government tax
system, and as a result, he ends up owing $58,236 to the government for
the ``privilege'' of having won his retaliation case.
It seems to me that there is something fundamentally wrong with the
law when it hurts the people it is supposed to protect. This being
said, it is time to change the mistakes made in the past by passing the
Civil Rights Tax Fairness Act 2000. This bill will go a long way toward
helping out victims of discrimination by eliminating taxes on emotional
distress awards, ending lump-sum taxation, and ending double taxation.
The changing of the law will have positive effects on citizens like Mr.
Lyons, allowing similar victims to keep more of their awards. At the
same time, it will be beneficial for business, since they will be able
to settle discrimination claims for lower settlements.
I ask unanimous consent to have printed in the record after my
remarks the letter I received from Mr. Lyon's attorney, Victoria L.
Herring. Ms. Herring does an outstanding job of quantifying and
personalizing the importance of the Civil Rights Tax Fairness Act.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
November 30, 1999.
Re Tax implications of civil rights litigation.
Senator Charles Grassley,
U.S. Senate,
Washington, DC.
Senator Tom Harkin,
U.S. Senate,
Washington, DC.
Dear Senators: I write you as an attorney of long-standing
in Des Moines and an Iowa citizen who represents other Iowans
in employment-related matters. I write to bring to your
attention a problem that you should know of (as legislation
is now pending to cure the problem, H.R. 1997), but perhaps
the effect of the present status of the law escaped you.
As you know, for some thirty years civil rights legislation
has been in force in this country; that includes Title VII,
the ADA, the ADEA, and other types of such statutes. As a
part of the legislative effort to provide remedies to victims
of discrimination, Congress also passed an attorney fees
provision that entitles a successful plaintiff to have his or
her attorney fees and expenses compensated by the losing
defendant, subject to the trial court's discretion.
Certainly, this legislation had a salutary effect in ending
some of the worst vestiges of discrimination and seeing that
the litigators were paid for their efforts as ``private
attorneys general''. The United States Supreme Court has
endorsed this concept in numerous cases.
What I now bring to your attention is the fact that all of
this legislation has been rendered meaningless and, indeed,
punitive against plaintiffs and their attorneys, by the
Congress's passage in 1996 of the Small Business Protection
Act and the various tax laws enacted by Congress over the
years. I have a real life example to bring to your attention,
in the hope that you will see how unfair and offensive is the
present state of the law. In fact, in light of the law as it
is today, it is entirely possible that no attorney in his or
her right mind would take any plaintiff's civil rights
case, and that no person in his or her right mind would
undertake to litigate civil rights discrimination no
matter how much they were harmed by such actions.
First, it is my understanding that the tax laws now require
the payment of taxes upon any and all sums obtained in
litigation or settlement that are not clearly related to
``personal physical injury''. As most (if not all) civil
rights and discrimination cases brought under Title VII, the
ADA, etc., rarely involve ``personal physical injury'', most
(if not all) jury verdicts, judge awards and/or settlements
are entirely taxable to the victim of discrimination. Perhaps
that was truly the intent of Congress in its 1996 passage of
the amendment to Internal Revenue Code Section 104. If so,
then victims of discrimination certainly do owe taxes on
whatever they might receive by way of verdict, judgment or
settlement, and should pay those taxes. Of course, that
frequently prevents settlements from occurring or raises the
cost of the settlements, but that might also be within
Congress's intent in passing the legislation. (That less than
salutary effect of the 1996 amendment is one reason quite a
variety of groups have supported the proposed bill, H.R.
1997, among them the U.S. Chamber of Commerce, NELA, the
AARP, etc.) In any event, that is not the entire problem
facing victims and litigators.
The most pernicious problem and one which causes me to
write to you is the combined effect of the above legislation
coupled with other laws of Congress, court cases and IRS
regulations. The effect is to cause any and all lawyers who
might wish to advocate for plaintiffs who have been harmed by
discrimination to rethink whether, in fact, they wish to
continue to do that work. And it places lawyers who do
continue to advocate at loggerheads with their clients'
interests.
The law is now clear that victims of discrimination owe tax
payments on whatever settlement/judgment they might receive.
And it is clear that their attorneys owe tax payments on
whatever attorney fees and expenses they are awarded.
However, the law is also quite clear that the victims of
discrimination also owe taxes upon the amount of
[[Page S7164]]
money their attorney is compensated for his/her efforts in
obtaining the settlement/verdict. While in some situations it
is possible to deduct those costs, given the Alternative
Minimum Tax provisions and recent Tax Court cases, it is
close to impossible to do so. Thus, victims of discrimination
may well add up with an additional tax burden in excess of
any sums of money actually obtained in the litigation to
compensate them for their injuries. This must be contrary to
the intent of Congress in passing civil rights legislation
over the past thirty years, and the views of the Supreme
Court in holding that attorney fees awards should be fully
but reasonably compensatory to the attorneys, in order to
facilitate attorneys in handling civil rights legislation.
I can provide you with a real-life example which impacts an
Iowa citizen who successfully fought discrimination and
retaliation and his attorney, the undersigned, who joined in
that effort. Based on what we know now, both of us are
quite sorry we ever entered into the effort to prevent
discrimination and retaliation from occurring.
Don Lyons assisted a co-worker in filing a sex
discrimination complaint against their employer. As a result,
he and the co-worker were retaliated against. We brought suit
on behalf of the co-worker for sex discrimination in
employment in the Southern District of Iowa and made a claim
for retaliation in violation of Title VII on behalf of both
Don and his co-worker. The case was litigated in the court
here, with the result that the sex discrimination case was
resolved prior to trial. However, because no settlement of
Don's claim was possible, his retaliation case went onto a
jury trial before eight jurors from the southern District of
Iowa.
We put on two days of evidence before the jury and Judge
Wolle, with the result that Don was awarded $1.00 in nominal
damages (a recognition of his right to bring the claim) and
$150,000 in punitive damages. On post-trial motions, Judge
Wolle upheld the jury's verdict on liability and held that
there was sufficient evidence that ``defendant had an evil
motive and had intentionally violated federal law in
retaliating against Lyons because he had assisted other
pilots in protecting their civil rights.'' However, Judge
Wolle remitted the punitive damage amount to $15,000.00,
because he thought that would be sufficient to punish the
defendant. Pursuant to the attorney fee provision of the
civil rights law, I have petitioned the court for
approximately $170,000 in fees and expenses; that is based on
my hourly rate of $180.00 an hour (a rate much less than that
of lawyers in other cities, and probably much less than the
two defense lawyers from Chicago who tried the case). The
fees and expenses amount may seem high, but is the result of
a fair amount of contentiousness and the need to take
depositions in Kansas and Arizona.
The problem for my client and for myself arises from the
clear tax implications of this situation. My client would
normally pay out of his $15,000 in punitive damages the sum
of $5,467.00, and that would be fine for him.
However, if the court awards me a ``fully compensatory''
fee and expenses figure of $150,000 (I am using that as an
example, because we have run the figures on this sum), not
only will I pay my taxes on this figure (gladly so), but my
client will also and without the ability to deduct the sum
due to the pernicious effect of the alternative minimum tax!
Amount
Don's taxes of $15,000........................................$5,467.00
Don's taxes on $15,000 plus the attorney fee award of $150,00067,791.00
Difference/Additional Taxes Owed by Don for the ``privilege'' of
having won his retaliation case.............................58,236.00
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In other words, because Don assisted someone to bring a
claim of sex discrimination through appropriate channels and
prevailed in his jury trial claim of retaliation, he will be
forced by present tax laws to pay an additional amount of
$58,236.00, which is over two-thirds of his annual salary.
And he will not have any additional money as a result of the
remittment of the judgment to pay that additional tax. And
because Don hired me to be his advocate and then prevailed
before a jury of eight citizens, he is penalized with a
severe tax penalty for having advocated civil rights. And I
need not tell you that this result has severely strained what
had been a cordial and positive working relationship between
attorney and client.
This is a clear injustice and one that we cannot find any
way of resolving, given the present state of the law. If we
could, we would. We are, therefore, bringing this to your
attention because it is a concern which only legislation can
rectify. We believe that H.R. 1997 is the only means possible
to rectify this problem and urge you to support it strongly
and vocally as soon as Congress returns.
If you have need of further information, please let me
know. Both Don and I would appreciate the opportunity to
visit with you or your staff to discuss this problem and to
shed light upon how this situation causes me to rethink my
chosen profession and Don to rethink his willingness to
assist people who are being discriminated against.
Very truly yours,
Victoria L. Herring,
Attorney at Law.
Mr. ROBB. Mr. President, I am pleased to introduce the Civil Rights
Tax Fairness Act of 2000 with Senators Grassley, Daschle and Collins.
This important legislation will correct several imperfections in our
Tax Code that unfairly tax the victims of civil rights violations at a
time when they are most vulnerable. I'm pleased that it accomplishes
this in a fashion that has bi-partisan Congressional support and has
been endorsed by civil rights organizations as well as the business
community.
The Civil Rights Tax Fairness Act contains several provisions. The
first section excludes emotional distress awards received in
discrimination cases from the gross income of the recipient. Due to a
change in the Small Business Job Protection Act of 1996, damages
received for emotional distress in civil rights cases are taxable,
while those received in slip and fall accidents are not. There is no
defensible reason for this disparity and it must be changed.
The bill would also allow employees who receive lump sum awards for
back wages for civil rights violations by their employers to take
advantage of income averaging. Currently, if an employee receives a
large award it will generally push that person into a higher income
bracket for that year due to the income spike from the damages. The
result is that the victim may be taxed at a higher rate than they would
if they had received the income as wages in the normal course of
business. This is the wrong tax treatment and should be corrected.
Finally, this legislation ends the double taxation on attorney's fees
that are awarded to a victim in a discrimination case. Mr. President,
even though the attorney ultimately gets the fees, not the victim,
present law not only taxes the attorney on the fees that they receive
when they take them into income, but also requires that the victim
include them in computing their gross income. Even though they are
supposed to be able to take a corresponding deduction, due to
limitations on miscellaneous deductions and the alternative minimum
tax, in most cases the victims cannot get the entire amount. This is
not fair and cannot be the intended effect.
I look forward to working with the senior Senator from Iowa in
getting this bill signed into law. It is time to bring our Tax Code
into the 21st Century. We must implement tax policies that help to
eradicate discrimination.
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