As previously reported here, the Senate on May 15 passed its tax package, the Jobs and Growth Tax Relief Reconciliation Act of 2003, which contained one of the reforms that is part of the Civil Rights Tax Relief Act (House version/Senate version). Section 521 of the Senate bill contained a provision eliminating the double taxation of attorneys fees in employment discrimination and civil rights cases. (If this search doesn’t work, go to the Thomas web site and search by the bill number, S 1054. The CRTRA provision is sect. 521). This would allow plaintiffs incurring legal fees in discrimination cases to take an “above-the-line” deduction of the legal fees, putting attorneys fees on the same footing as other business expenses that are fully deductible (dollar-for-dollar) from income. For more information on this topic, see WF’s fair taxes page.
However, we have recently learned that this provision, along with a large number of other additions and amendments, is not part of the final tax package negotiated with the House of Representatives. While we have not yet seen the final language, the House and Senate are both expected to pass a bill this week that does not contain the attorneys fees provision or any other part of the CRTRA. We are told that there will possibly be future tax reform opportunities later this year, but this measure will not be part of the measure that the President is expected to sign by Memorial Day. For more information on the tax cut that was negotiated, see Washington Post article.
We will continue our efforts to get this bill passed this year, and will work to ensure that the provisions added to larger tax packages include all plaintiffs who have won or settled cases in this tax year (which the Senate provision did not do) and the other pieces of the CRTRA that were not included in the Senate tax package (removing the taxability of emotional distress damages and the additional taxation of lump sum back wage awards.)
Please continue to lobby Congress on this subject: if we are to pass legislation this year, we must keep up the pressure. At the Workplace Fairness Action Center, please respond to one of the action alerts listed below: Stop Taxing Discrimination Awards Unfairly! (for those not currently involved in a civil rights lawsuit); or our second alert especially designed for Current Plaintiffs in Civil Rights Cases.