EMPOWER Act—Part 2

II 116TH CONGRESS 1ST SESSION S. 574 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 harass- ment based on protected categories. IN THE SENATE OF THE UNITED STATES FEBRUARY 27, 2019 Ms. HARRIS (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, includ- ing sexual harassment, sexual assault, and harassment based on protected categories. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Ending the Monopoly 4 of Power Over Workplace harassment through Education 5 and Reporting Act—Part 2’’ or the ‘‘EMPOWER Act— 6 Part 2’’. 7 VerDate Sep 11 2014 22:20 Mar 11, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S574.IS S574 pbinns on DSK79D2C42PROD with BILLS 2 •S 574 IS SEC. 2. TAX TREATMENT OF AMOUNTS RELATED TO JUDG- 1 MENTS. 2 (a) DENIAL OF DEDUCTION.— 3 (1) IN GENERAL.—Part IX of subchapter B of 4 chapter 1 of the Internal Revenue Code of 1986 is 5 amended by adding at the end the following new sec- 6 tion: 7 ‘‘SEC. 280I. AMOUNTS RELATED TO JUDGMENTS WITH RE- 8 SPECT TO WORKPLACE HARASSMENT, IN- 9 CLUDING SEXUAL HARASSMENT. 10 ‘‘No deduction shall be allowed under this chapter for 11 amounts paid or incurred by the taxpayer— 12 ‘‘(1) pursuant to any judgment or award in liti- 13 gation related to workplace harassment, including 14 sexual harassment, or 15 ‘‘(2) for expenses and attorney’s fees in connec- 16 tion with the litigation resulting in the judgment or 17 award described in paragraph (1) (other than ex- 18 penses or attorney’s fees paid by the workplace har- 19 assment plaintiff or claimant), or for any insurance 20 covering the defense or liability of the underlying 21 claims with respect to such litigation.’’. 22 (2) CLERICAL AMENDMENT.—The table of sec- 23 tions for part IX of subchapter B of chapter 1 of 24 such Code is amended by adding at the end the fol- 25 lowing new item: 26 VerDate Sep 11 2014 22:20 Mar 11, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S574.IS S574 pbinns on DSK79D2C42PROD with BILLS 3 •S 574 IS ‘‘Sec. 280I. Amounts related to judgments with respect to workplace harass- ment, including sexual harassment.’’. (3) CONFORMING AMENDMENT.—Section 162 1 of such Code is amended by striking subsection (q). 2 (4) EFFECTIVE DATE.—The amendments made 3 by this subsection shall apply to amounts paid or in- 4 curred in taxable years beginning after the date of 5 the enactment of this Act. 6 (b) EXCLUSION FROM INCOME.— 7 (1) IN GENERAL.—Part III of subchapter B of 8 chapter 1 of the Internal Revenue Code of 1986 is 9 amended by inserting after section 139G the fol- 10 lowing new section: 11 ‘‘SEC. 139H. AMOUNTS RECEIVED IN CONNECTION WITH 12 JUDGMENTS, AWARDS, AND SETTLEMENTS 13 WITH RESPECT TO WORKPLACE HARASS- 14 MENT. 15 ‘‘Gross income shall not include any amount received 16 in connection with a judgment or award in, or a settlement 17 of— 18 ‘‘(1) a claim related to workplace harassment, 19 including sexual harassment or other unlawful dis- 20 crimination, or 21 ‘‘(2) any other claim of unlawful discrimination 22 (as defined by section 62(e)). 23 VerDate Sep 11 2014 22:20 Mar 11, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S574.IS S574 pbinns on DSK79D2C42PROD with BILLS 4 •S 574 IS The preceding sentence shall not include any employment 1 discrimination compensation to which section 1302 ap- 2 plies.’’. 3 (2) CLERICAL AMENDMENT.—The table of sec- 4 tions for part III of subchapter B of chapter 1 of 5 such Code is amended by inserting after the item re- 6 lating to section 139G the following new item: 7 ‘‘Sec. 139H. Amounts received in connection with judgments, awards, or settle- ments with respect to workplace harassment.’’. (3) EFFECTIVE DATE.—The amendments made 8 by this subsection shall apply to amounts received in 9 taxable years beginning after the date of the enact- 10 ment of this Act. 11 SEC. 3. LIMITATION ON TAX BASED ON INCOME AVER- 12 AGING FOR COMPENSATION RECEIVED ON 13 ACCOUNT OF CERTAIN UNLAWFUL EMPLOY- 14 MENT DISCRIMINATION. 15 (a) IN GENERAL.—Part I of subchapter Q of chapter 16 1 of the Internal Revenue Code of 1986 (relating to in- 17 come averaging) is amended by adding at the end the fol- 18 lowing new section: 19 ‘‘SEC. 1302. INCOME FROM COMPENSATION RECEIVED ON 20 ACCOUNT OF CERTAIN UNLAWFUL EMPLOY- 21 MENT DISCRIMINATION. 22 ‘‘(a) GENERAL RULE.—In the case of any employ- 23 ment discrimination compensation received during any 24 VerDate Sep 11 2014 22:20 Mar 11, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S574.IS S574 pbinns on DSK79D2C42PROD with BILLS 5 •S 574 IS taxable year, the tax imposed by this chapter for such tax- 1 able year with respect to such compensation shall not ex- 2 ceed the sum of— 3 ‘‘(1) the tax which would be so imposed if— 4 ‘‘(A) no amount of such compensation 5 were included in gross income for such year, 6 and 7 ‘‘(B) no deduction were allowed for such 8 year for expenses otherwise allowable as a de- 9 duction to the taxpayer for such year in connec- 10 tion with making or prosecuting any claim of 11 unlawful employment discrimination by or on 12 behalf of the taxpayer, plus 13 ‘‘(2) the product of— 14 ‘‘(A) the combined number of years in the 15 backpay period and the foregone compensation 16 period, and 17 ‘‘(B) the amount by which the tax deter- 18 mined under paragraph (1) would increase if 19 the sum of— 20 ‘‘(i) the average of the average annual 21 net employment discrimination compensa- 22 tion in the backpay period, and 23 ‘‘(ii) the average of the average an- 24 nual net employment discrimination com- 25 VerDate Sep 11 2014 22:20 Mar 11, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S574.IS S574 pbinns on DSK79D2C42PROD with BILLS 6 •S 574 IS pensation in the foregone compensation pe- 1 riod, 2 were included in gross income for such year. 3 ‘‘(b) DEFINITIONS.—For purposes of this section— 4 ‘‘(1) EMPLOYMENT DISCRIMINATION COM- 5 PENSATION.—The term ‘employment discrimination 6 compensation’ means any backpay or foregone com- 7 pensation receivable (whether as lump sums or peri- 8 odic payments) on account of a judgment or settle- 9 ment resulting from a claim of unlawful discrimina- 10 tion (as defined in section 62(e)) in violation of law 11 which relates to employment. 12 ‘‘(2) BACKPAY.—The term ‘backpay’ means 13 amounts which are includible in gross income for the 14 taxable year as compensation which is attributable 15 to services performed (or which would have been 16 performed but for the violation of law described in 17 paragraph (1)) as an employee, former employee, or 18 prospective employee in years before such taxable 19 year for the taxpayer’s employer, former employer, 20 or prospective employer. 21 ‘‘(3) FOREGONE COMPENSATION.—The term 22 ‘foregone compensation’ means amounts which are 23 includible in gross income for the taxable year as 24 compensation which is attributable to services which 25 VerDate Sep 11 2014 22:20 Mar 11, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S574.IS S574 pbinns on DSK79D2C42PROD with BILLS 7 •S 574 IS would have been performed in years after such tax- 1 able year but for the violation of law described in 2 paragraph (1). 3 ‘‘(4) BACKPAY PERIOD.—The term ‘backpay pe- 4 riod’ means the period during which services de- 5 scribed in paragraph (2) were performed or would 6 have been performed but for the violation of law de- 7 scribed in paragraph (1). If such period is not equal 8 to a whole number of taxable years, such period 9 shall be increased to the next highest number of 10 whole taxable years. 11 ‘‘(5) FOREGONE COMPENSATION PERIOD.—The 12 term ‘foregone compensation period’ means the pe- 13 riod during which services described in paragraph 14 (3) would have been performed but for the violation 15 of law described in paragraph (1). If such period is 16 not equal to a whole number of taxable years, such 17 period shall be increased to the next highest number 18 of whole taxable years. 19 ‘‘(6) AVERAGE ANNUAL NET EMPLOYMENT DIS- 20 CRIMINATION COMPENSATION.—The term ‘average 21 annual net employment discrimination compensation’ 22 with respect to any period means the amount equal 23 to— 24 ‘‘(A) the excess of— 25 VerDate Sep 11 2014 22:20 Mar 11, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S574.IS S574 pbinns on DSK79D2C42PROD with BILLS 8 •S 574 IS ‘‘(i) employment discrimination com- 1 pensation attributable to such period, over 2 ‘‘(ii) the amount of the deductions de- 3 scribed in subsection (a)(1)(B), divided by 4 ‘‘(B) the total number of years in the 5 backpay period and the foregone compensation 6 period.’’. 7 (b) CLERICAL AMENDMENT.—The table of sections 8 for part I of subchapter Q of chapter 1 of the Internal 9 Revenue Code of 1986 is amended by inserting after sec- 10 tion 1301 the following new item: 11 ‘‘Sec. 1302. Income from compensation received on account of certain unlawful employment discrimination.’’. (c) INCOME AVERAGING NOT TO INCREASE ALTER- 12 NATIVE MINIMUM TAX LIABILITY.—Section 55(c) of the 13 Internal Revenue Code of 1986 is amended by redesig- 14 nating paragraph (3) as paragraph (4) and by inserting 15 after paragraph (2) the following new paragraph: 16 ‘‘(3) COORDINATION WITH INCOME AVERAGING 17 FOR AMOUNTS RECEIVED ON ACCOUNT OF EMPLOY- 18 MENT DISCRIMINATION.—Solely for purposes of this 19 section, section 1302 shall not apply in computing 20 the regular tax liability.’’. 21 (d) EFFECTIVE DATE.—The amendments made by 22 this section shall apply to amounts paid or incurred in tax- 23 VerDate Sep 11 2014 22:20 Mar 11, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S574.IS S574 pbinns on DSK79D2C42PROD with BILLS 9 •S 574 IS able years beginning after the date of the enactment of 1 this Act. 2 Æ VerDate Sep 11 2014 22:20 Mar 11, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6301 E:\BILLS\S574.IS S574 pbinns on DSK79D2C42PROD with BILLS