Tax Relief Act Ensures Trafficking Survivors Keep 100% of Court-Ordered Restitution

This legislation, officially titled the Human Trafficking Survivor Tax Relief Act, is straightforward: it amends the federal tax code to ensure that human trafficking survivors don't have to pay federal income tax on any money they receive from court-ordered restitution or civil damages awards. Essentially, if a court orders someone to pay a survivor $100,000, the survivor gets to keep the full $100,000, rather than having a chunk taken out for taxes.

The IRS Exemption: Section 139M

Right now, when people receive large financial awards—even in cases of personal injury or damages—the IRS often considers parts of that money taxable income. This bill fixes that for trafficking survivors by creating a new exclusion, Section 139M, in the Internal Revenue Code (IRC). This new section specifically exempts awards received under two critical parts of federal law: criminal restitution (18 U.S.C. § 1593) and civil actions brought by victims (18 U.S.C. § 1595). The change is set to apply to any awards received in tax years starting after the law is enacted.

What This Means for Survivors

Imagine a survivor who spent years rebuilding their life, finally winning a substantial civil judgment of, say, $500,000 against their trafficker. Without this bill, they could potentially face a significant tax bill on that award, diminishing the financial recovery meant to cover years of lost wages, medical bills, and other costs. This legislation ensures that the money intended to help them achieve financial stability and recovery remains entirely intact. It’s a direct financial boost that maximizes the impact of the court’s decision.

Practical Impact: Keeping the Whole Check

For most people, this bill won't change anything about their daily tax filing. But for the specific, vulnerable population of trafficking survivors, it provides crucial protection. It removes a potential barrier to justice—the fear that a large award will lead to a complicated tax liability—and acknowledges that these funds are compensatory, not income in the traditional sense. By making the awards completely tax-free, the law ensures that the full financial weight of the court's judgment goes toward the survivor's recovery and reintegration, which is the whole point of these awards in the first place.