Discrimination News

Certain Civil Rights Suits, Including Those Alleging Job-Related Discrimination And Other Lawsuits

WASHINGTON – Sen. Chuck Grassley, chairman of the Committee on Finance, is working to end a tax law fluke that forces plaintiffs who win settlements in civil rights cases and other lawsuits to pay income taxes on parts of the settlements they never see – in some cases even owing thousands of dollars more than they win. Several Iowa lawyers have written to Grassley out of concern for their clients in these cases. "Tax relief gets the headlines, but part of tax relief is tax fairness," Grassley said. "It's clearly a fairness issue to make sure people don't have to pay income taxes on income that was never theirs in the first place. That's common sense." Grassley late last week included a provision in his committee-passed economic growth bill to end the practice of unfair taxation in certain lawsuits. The bipartisan provision Grassley included would, in effect, exclude from a plaintiff's taxable income legal fees in certain civil rights suits, including those alleging job-related discrimination, and other lawsuits. Under current law, since 1996, plaintiffs who win damages in personal injury cases that involve physical injuries aren't taxed. But damages in cases involving discrimination on the basis or age, race or sex are taxed.

For example, Cynthia C. Spina, an Illinois police officer, secured a $1.525 million settlement from her department last year after a long legal battle in which she alleged that she was a victim of sexual discrimination and harassment. But, through a quirk in the law, Spina's tax bill on the settlement could erase her gains and leave her owing $100,000 more. That's because she must pay income tax on the entire settlement, even though the court earmarked $1.15 million of it for legal fees and costs, according to media reports."If we don't fix this law, it could have a chilling effect on discrimination cases," Grassley said. "Legitimately wronged people could have little recourse. A out-of-whack tax system is in danger of negating the value of discrimination lawsuits." The provision Grassley included will receive full Senate consideration as part of the broader economic growth package this week and could win Senate approval later this week.

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	Did You Know?
	The law requires equal pay for equal work The Equal Pay Act prohibits discrimination on the basis of sex in the payment of wages or benefits, where men and women perform work of similar skill, effort, and responsibility for the same employer under similar working conditions.