WASHINGTON – U.S. Senator John Cornyn (R-TX) and Senate Finance Committee Chairman Ron Wyden (D-OR) released the following statements after their Human Trafficking Survivor Tax Relief Act, which would exempt civil damages, restitution, and other monetary awards given to human trafficking survivors from federal income taxes, passed the Senate unanimously. It would also codify current Internal Revenue Service (IRS) guidance that makes restitution payments made to survivors in criminal cases free from federal income taxes.
“Survivors of human trafficking often have to relive their abuses when they pursue justice. This legislation provides relief to survivors without the fear of being penalized or audited,” said Sen. Cornyn. “It would also allow survivors who go through civil proceedings to receive the same treatment as those compensated through the criminal justice system. The last thing survivors should expect is to get stuck with a bill from the IRS.”
“Human trafficking survivors face numerous obstacles when trying to seek justice against the perpetrators. An unexpected tax burden should not be one of them. Passage of our bill, which ends tax penalties on survivors, will help survivors afford the legal costs of punishing individuals who have committed such heinous crimes,” said Sen. Wyden.
They were joined by Senators Tom Carper (D-DE), Rob Portman (R-OH), Tim Scott (R-SC), James Lankford (R-OK), Kyrsten Sinema (D-AZ), Roger Wicker (R-MS), and Jim Inhofe (R-OK) as cosponsors.
Background:
Under the Internal Revenue Code, civil damages awarded to human trafficking victims are considered taxable income. This legislation would exempt civil damages from federal income taxes, allowing survivors to file their taxes without worry of penalties or fees for not reporting awarded damages as income. It also would provide parity between criminal restitution, which is tax-exempt through IRS Notice 2012-12, and civil damages, which are not. Often, human trafficking survivors’ only recourse to pursue justice against traffickers is through civil litigation. Finally, the bill codifies IRS Notice 2012-12, ensuring that restitution payments made in criminal case remain tax-free.
The Human Trafficking Survivor Tax Relief Act is supported by the Freedom Network USA, the Polaris Project, & Rights4Girls. Other organizations who have supported past efforts include the End Child Pornography and Trafficking (ECPAT), the National Association to Protect Children, the Coalition Against Trafficking in Women (CATW), Shared Hope International, the National Children’s Alliance, Freedom Network USA, the Alliance to End Slavery and Trafficking (ATEST), and the Coalition to Abolish Slavery & Trafficking (CAST).