Refreshing Change: A Tax Break for Some Civil Rights Plaintiffs
It’s a rare thing when politicians, excitedly slashing taxes for the wealthy, manage to confer a financial benefit on ordinary citizens. It is even more unusual for them to help the victims of civil rights violations.
Yet, that’s exactly what Congress did in a little noticed section of 2015’s “Protecting Americans from Tax Hikes Act.” Section 304 renders non-taxable any damages collected by plaintiffs who sue for “wrongful incarceration.” It does so by amending Section 139F of the Internal Revenue Code in providing that:
In the case of any wrongfully incarcerated individual, gross income shall not include any civil damages, restitution, or other monetary award (including compensatory or statutory damages and restitution imposed in a criminal matter) relating to the incarceration of such individual for the covered offense for which such individual was incarcerated.
A “covered offense” includes any crime under federal or state law.
Important limitations on the right to recover the newly tax-free damages are set out in the law. A successful plaintiff must have been convicted (or pleaded guilty) to a crime, served all or part of a related sentence, and been pardoned or granted clemency because he or she was innocent of the crime. The law also applies to an individual whose original conviction is vacated or reversed, and the indictment or complaint against him is dismissed, or he is found not guilty at a new trial.
This amendment eliminates at least one obstacle to the settlement of civil rights lawsuits brought in wrongful conviction cases. It also reflects a better-late-than-never congressional recognition that the victims of miscarriages of justice deserve appropriate compensation. It represents an additional resource for civil rights lawyers and their clients working to vindicate fundamental constitutional protections.
The civil rights team at Williams Cedar is experienced in representing victims of wrongful convictions and incarceration. If you wish to consult with us regarding your case, please visit us online or call us at 215-557-0099.
By: Gerald J. Williams, Esq.