Bipartisan bill would end IRS federal taxation of compensation for wrongful conviction
(Washington, DC — Dec. 18, 2015) Today, as a part of the tax extenders package, Congress passed H.R. 3086, the Wrongful Conviction Tax Relief Act of 2015. This bipartisan legislation, introduced by Reps. Sam Johnson (R-TX) and John Larson (D-CT), and supported by several members of the Senate, including Charles Schumer (D-NY) and John Cornyn (R-TX), ends the federal government’s taxation of compensation received for wrongful conviction. In the U.S., individuals who have been wrongfully convicted and exonerated by DNA evidence spent on average 14 years wrongfully incarcerated. After being released, some of these men and women then had to mount an additional fight either through their courts or state legislatures to secure compensation for their wrongful convictions, only later to discover that the Internal Revenue Service (IRS) sought to tax a significant portion of their compensation awards.
“It’s crazy that, after stealing years of a person’s life, providing little if any help with readjusting to the outside world, the government would want to take away the money that is supposed to help the wrongfully convicted rebuild their lives. As it is, too many states provide inadequate re-entry services for the wrongfully convicted. It’s as though we are supposed to just pick up from where we left off, but it doesn’t work that way,” said Marvin Anderson, an Innocence Project board member who spent 20 years in prison for a rape that he did not commit before DNA evidence proved his innocence. “Changing the tax law is the right thing to do, and I’m happy Congress passed this bill.”
Thirty states, the District of Columbia, and the federal government provide some form of statutory compensation for wrongful conviction and incarceration. This legislation would amend the Internal Revenue Code to allow a wrongfully incarcerated individual an exclusion from federal taxation on civil damages, restitution or other monetary awards received as compensation for wrongful conviction.
“Wrongfully convicted individuals face profound barriers to reentry while grappling with the lasting physical, emotional and psychological impacts of incarceration,” said Rebecca Brown, Policy Director for the Innocence Project, which is affiliated with Cardozo School of Law. “We must do more to address these reentry needs, and the Wrongful Convictions Tax Relief Act of 2015 is an important step in this process.”