H.R. 1306: Tax Fairness for Survivors Act (119th Congress) Bill Summary

This bill, known as the Tax Fairness for Survivors Act, aims to amend the Internal Revenue Code to address the treatment of certain compensation related to sexual assault and sexual harassment claims. Specifically, it proposes the following key changes:

Exemption from Gross Income

The bill introduces a new provision that excludes from gross income any amounts received as judgments, awards, or settlements related to claims of:

Sexual assault, which includes nonconsensual sexual acts or contacts as defined under federal law or applicable state, tribal, or local laws.
Sexual harassment as defined by federal, state, tribal, or local laws.

This exemption applies to various types of payments, including:

Backpay and frontpay
Punitive damages
Reimbursement of attorney’s fees
Payments made in connection with the release of claims or settlement of claims

Impact on Social Security and Other Taxes

The bill also updates aspects of the Internal Revenue Code relating to various types of taxes:

Social Security Taxes: It amends the code to clarify that amounts excluded from gross income under this new provision will not count towards gross income for Social Security tax calculations.
Railroad Retirement Tax: Similar to Social Security, it states that amounts excluded from gross income will not be included in compensation for railroad retirement tax purposes.
Unemployment Taxes: The bill ensures that such excluded payments do not count towards unemployment compensation.
Wage Withholding: It allows for the exclusion of these amounts from wage withholding calculations.

Regulatory Guidance

The bill tasks the Secretary of the Treasury with creating regulations and guidelines necessary to implement this new exclusion effectively. This includes instructions on how to differentiate between amounts received under this provision and other types of income.