New Bill Would Make Sexual Assault Settlement Money Tax-Free for Survivors

This bill, the Survivor Justice Tax Prevention Act, proposes a significant change to the U.S. tax code affecting survivors of sexual assault and unwanted sexual contact. The main goal is straightforward: to amend Section 104(a)(2) of the Internal Revenue Code so that money received from a legal judgment or settlement related to these experiences generally wouldn't be counted as taxable income.

Keeping Settlement Money Where It Belongs

Currently, settlement funds can sometimes be subject to income tax, which reduces the net amount a survivor actually keeps. This legislation aims to exempt compensatory damages – money intended to cover things like medical expenses, therapy costs, lost wages, or pain and suffering – from federal income tax. It's important to note there's a specific carve-out: punitive damages, which are extra funds sometimes awarded purely to punish the offender rather than compensate the victim, would still be considered taxable income under this bill. The clear intention here is to ensure that funds meant to aid a survivor's recovery and well-being aren't diminished by a tax bill.

Making It Official (Without Extra Hurdles)

So, how would this work in practice? The bill specifies that if the official court judgment or the settlement agreement clearly states the damages are related to sexual acts or sexual contact, that designation is key for tax purposes. Crucially, the legislation also includes a provision stating that tax authorities cannot deny this tax-exempt treatment solely based on the absence of medical records. This could be a significant point, potentially simplifying the process and removing a potential documentation hurdle for survivors seeking to substantiate their claim.

Spreading the Word

Recognizing that a tax change is only helpful if people know about it, the bill directs the Secretary of the Treasury to develop and run a public awareness program. This campaign, created in consultation with the Department of Justice's Office on Violence Against Women and other relevant agencies, would aim to inform the public, particularly survivors and their advocates, about this new tax exclusion. The changes proposed by this act would apply to damages received from judgments made and agreements entered into after the date the bill is officially enacted.