WASHINGTON – U.S. Senator John Cornyn (R-TX), Senate Finance Committee Chairman Ron Wyden (D-OR), and Senators James Lankford (R-OK) and Kyrsten Sinema (I-AZ) today introduced 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. 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.

“Seeking justice can be an incredibly difficult process for survivors of human trafficking, and the IRS doesn’t need to make it even harder by taxing the restitution they are rightfully owed,” said Sen. Cornyn. “This legislation would ensure survivors don’t have to pay federal income taxes on payments given to them because of the horrors they endured.”

“Human trafficking survivors have been through true horrors, and the last thing they need is a big tax bill right when they’re trying to get back normal lives,” said Chairman Wyden. “This legislation will make it easier for survivors to pursue justice against their abusers and rebuild their lives by exempting critical financial relief from federal taxes. I’m all in to get this bill over the finish line.”

“Human trafficking survivors often face a long path to getting the closure and justice they deserve,” said Sen. Lankford. “As they heal, they shouldn’t be punished by the US tax code. This bill will support survivors by making sure that damages awarded, whether through civil or criminal cases, are exempt from federal income tax. This lets those who suffered at the hands of traffickers focus on recovery instead of bureaucracy.”

“Human trafficking survivors deserve our support as they rebuild their lives,” said Sen. Sinema. “It is common sense and the right thing to protect these individuals from harmful federal taxes.”

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).