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Tuesday, October 16, 2007

More on the Civil Rights Tax Relief Act of 2007

I previously blogged the National Law Journal op-ed by Vivian Berger (Columbia) in support of the Civil Rights Tax Relief Act of 2007 (H.R. 1540; S. 1689).  The ACt would, among other things, make the tax code more favorable to employment-law plaintiffs by extending the ยง 104 exclusion to cover damages for emotional distress in job-bias cases.  Walter Olson takes issue with the Act at Point of Law:

The argument is that plaintiffs in conventional tort cases can already exclude such damages from taxable income, and so employment-law plaintiffs should get to do so too. (The possibility of bringing uniformity to the scene by subjecting the conventional tort claimants to taxation is, of course, unthinkable). Note Prof. Berger's perfectly cool-headed invitation for plaintiff and defense interests to collude against the interests of the public fisc: plaintiffs and their lawyers are of course supposed to favor the tax break for the obvious reasons, while defendants are urged to favor it because it would "encourag[e] lower (because less taxable) settlements". Can you spot a possible flaw in that logic from the defendant's point of view? Maybe the possibility that by making employment lawsuits more lucrative it will encourage more of them to be filed in the first place?

http://taxprof.typepad.com/taxprof_blog/2007/10/more-on-the-civ.html

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» Taxation of employment-law damages from PointOfLaw Forum
The proposed Civil Rights Tax Relief Act of 2007 is the latest effort in Congress to make the tax code more favorable to employment-law plaintiffs, by (among other steps) declaring damages for emotional distress in job-bias cases to be tax-free... [Read More]

Tracked on Oct 16, 2007 7:32:41 AM

» Taxation of employment-law damages from PointOfLaw Forum
The proposed Civil Rights Tax Relief Act of 2007 is the latest effort in Congress to make the tax code more favorable to employment-law plaintiffs, by (among other steps) declaring damages for emotional distress in job-bias cases to be tax-free... [Read More]

Tracked on Aug 6, 2010 3:07:46 PM

Comments

I disagree with Mr. Olson. His thinking is that tax relief makes settlements more lucrative and therefore increases litigation. What this thinking ignores is for whom it is more lucrative-- not the attorney. When contemplating a complaint, most employees are not aware of the taxation issue at all. I would say that many employees, even if subjected to illegal discrimination, don't do anything about it. Therefore I say that litigation is equally as likely to happen, it's just that the employee doesn't get nailed on taxes.

Posted by: Erik Pritchard | Oct 19, 2007 2:26:19 PM

But there's a plus side to this. Students in my labor and employment law classes aren't there because they think they "have to" take the class for the bar. Presumably, they take my classes in many to most cases because they think they actually might be interested in the subject, and/ or because they like me or think they might like me as a prof. Now, maybe some students will change those opinions during the semester, and I'm sure some sign up because they want a class that meets at X time on X day to fit...

Posted by: read this now | Mar 20, 2008 10:10:35 AM