Human Trafficking Survivor Tax Relief Act: Restitution Payments Exempt from Federal Income Tax

The newly introduced Human Trafficking Survivor Tax Relief Act is a straightforward piece of legislation designed to make sure that money awarded to survivors of human trafficking actually stays with the survivors. The bill amends the Internal Revenue Code (IRC) by adding a new section, 139M, which clearly states that any civil damages, restitution, or other monetary awards received under specific federal human trafficking statutes (18 U.S.C. 1593 and 1595) will not be counted as gross income for federal tax purposes. This exclusion applies to all tax years beginning after the law is enacted.

Clearing the Path to Recovery

Think about it: when a court orders a perpetrator to pay restitution to a victim, the whole point is to help that survivor rebuild their life. But under current tax rules, depending on how the award is categorized, the IRS might consider some of that money taxable income. That means the survivor could lose a significant chunk—sometimes 20% or more—of the compensation intended to cover medical bills, lost wages, and recovery costs, simply because of federal income tax. This bill closes that loophole.

What This Means for Survivors

This change ensures that every dollar of court-ordered compensation goes directly toward the survivor’s recovery efforts. Say a survivor is awarded $100,000 in damages and restitution under 18 U.S.C. 1595. Without this law, they might have to pay taxes on a portion of that, reducing the net amount they receive. With the new Section 139M in place, that entire $100,000 is tax-free at the federal level. For people trying to recover from immense trauma and financial instability, maximizing every dollar of relief is critical. It’s about ensuring that the intent of the victim compensation laws isn't undermined by the tax code.

Focusing on Specific Statutes

It’s important to note that this tax break is highly targeted. It specifically references awards made under 18 U.S.C. 1593 (criminal restitution) and 18 U.S.C. 1595 (civil remedies). This specificity is good news for clarity; it prevents confusion about which payments qualify and which don't, giving the IRS clear boundaries for implementation. For the average person, this means if you receive a monetary award related to human trafficking, you won't have to worry about whether the IRS will demand a cut. The law makes it explicitly non-taxable, providing certainty during a difficult time.