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S. 574: EMPOWER Act-Part 2


The text of the bill below is as of Feb 27, 2019 (Introduced).


II

116th CONGRESS

1st Session

S. 574

IN THE SENATE OF THE UNITED STATES

February 27, 2019

(for herself and Ms. Murkowski) introduced the following bill; which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to modify the tax treatment of amounts related to employment discrimination and harassment in the workplace, including sexual harassment, sexual assault, and harassment based on protected categories.

1.

Short title

This Act may be cited as the Ending the Monopoly of Power Over Workplace harassment through Education and Reporting Act—Part 2 or the EMPOWER Act—Part 2.

2.

Tax treatment of amounts related to judgments

(a)

Denial of deduction

(1)

In general

Part IX of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:

280I.

Amounts related to judgments with respect to workplace harassment, including sexual harassment

No deduction shall be allowed under this chapter for amounts paid or incurred by the taxpayer—

(1)

pursuant to any judgment or award in litigation related to workplace harassment, including sexual harassment, or

(2)

for expenses and attorney's fees in connection with the litigation resulting in the judgment or award described in paragraph (1) (other than expenses or attorney's fees paid by the workplace harassment plaintiff or claimant), or for any insurance covering the defense or liability of the underlying claims with respect to such litigation.

.

(2)

Clerical amendment

The table of sections for part IX of subchapter B of chapter 1 of such Code is amended by adding at the end the following new item:

Sec. 280I. Amounts related to judgments with respect to workplace harassment, including sexual harassment.

.

(3)

Conforming amendment

Section 162 of such Code is amended by striking subsection (q).

(4)

Effective date

The amendments made by this subsection shall apply to amounts paid or incurred in taxable years beginning after the date of the enactment of this Act.

(b)

Exclusion from income

(1)

In general

Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 139G the following new section:

139H.

Amounts received in connection with judgments, awards, and settlements with respect to workplace harassment

Gross income shall not include any amount received in connection with a judgment or award in, or a settlement of—

(1)

a claim related to workplace harassment, including sexual harassment or other unlawful discrimination, or

(2)

any other claim of unlawful discrimination (as defined by section 62(e)).

The preceding sentence shall not include any employment discrimination compensation to which section 1302 applies.

.

(2)

Clerical amendment

The table of sections for part III of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 139G the following new item:

Sec. 139H. Amounts received in connection with judgments, awards, or settlements with respect to workplace harassment.

.

(3)

Effective date

The amendments made by this subsection shall apply to amounts received in taxable years beginning after the date of the enactment of this Act.

3.

Limitation on tax based on income averaging for compensation received on account of certain unlawful employment discrimination

(a)

In general

Part I of subchapter Q of chapter 1 of the Internal Revenue Code of 1986 (relating to income averaging) is amended by adding at the end the following new section:

1302.

Income from compensation received on account of certain unlawful employment discrimination

(a)

General rule

In the case of any employment discrimination compensation received during any taxable year, the tax imposed by this chapter for such taxable year with respect to such compensation shall not exceed the sum of—

(1)

the tax which would be so imposed if—

(A)

no amount of such compensation were included in gross income for such year, and

(B)

no deduction were allowed for such year for expenses otherwise allowable as a deduction to the taxpayer for such year in connection with making or prosecuting any claim of unlawful employment discrimination by or on behalf of the taxpayer, plus

(2)

the product of—

(A)

the combined number of years in the backpay period and the foregone compensation period, and

(B)

the amount by which the tax determined under paragraph (1) would increase if the sum of—

(i)

the average of the average annual net employment discrimination compensation in the backpay period, and

(ii)

the average of the average annual net employment discrimination compensation in the foregone compensation period,

were included in gross income for such year.
(b)

Definitions

For purposes of this section—

(1)

Employment discrimination compensation

The term employment discrimination compensation means any backpay or foregone compensation receivable (whether as lump sums or periodic payments) on account of a judgment or settlement resulting from a claim of unlawful discrimination (as defined in section 62(e)) in violation of law which relates to employment.

(2)

Backpay

The term backpay means amounts which are includible in gross income for the taxable year as compensation which is attributable to services performed (or which would have been performed but for the violation of law described in paragraph (1)) as an employee, former employee, or prospective employee in years before such taxable year for the taxpayer’s employer, former employer, or prospective employer.

(3)

Foregone compensation

The term foregone compensation means amounts which are includible in gross income for the taxable year as compensation which is attributable to services which would have been performed in years after such taxable year but for the violation of law described in paragraph (1).

(4)

Backpay period

The term backpay period means the period during which services described in paragraph (2) were performed or would have been performed but for the violation of law described in paragraph (1). If such period is not equal to a whole number of taxable years, such period shall be increased to the next highest number of whole taxable years.

(5)

Foregone compensation period

The term foregone compensation period means the period during which services described in paragraph (3) would have been performed but for the violation of law described in paragraph (1). If such period is not equal to a whole number of taxable years, such period shall be increased to the next highest number of whole taxable years.

(6)

Average annual net employment discrimination compensation

The term average annual net employment discrimination compensation with respect to any period means the amount equal to—

(A)

the excess of—

(i)

employment discrimination compensation attributable to such period, over

(ii)

the amount of the deductions described in subsection (a)(1)(B), divided by

(B)

the total number of years in the backpay period and the foregone compensation period.

.

(b)

Clerical amendment

The table of sections for part I of subchapter Q of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 1301 the following new item:

Sec. 1302. Income from compensation received on account of certain unlawful employment discrimination.

.

(c)

Income averaging not To increase alternative minimum tax liability

Section 55(c) of the Internal Revenue Code of 1986 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 amounts received on account of employment discrimination

Solely for purposes of this section, section 1302 shall not apply in computing the regular tax liability.

.

(d)

Effective date

The amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after the date of the enactment of this Act.