ACC Urges Faster Path to Settlements With Civil Justice Tax Fairness Act

Bill Would Remove Tax Obstacles to Employment Discrimination, Harassment Settlements

Posted: Sep 26, 2013

WASHINGTON (September 26, 2013) –– The Association of Corporate Counsel (ACC), a global bar association representing more than 30,000 in-house counsel employed by over 10,000 organizations, today sent letters to Congress to advocate for passage of the Civil Justice Tax Fairness Act (S. 1224 and H.R. 2509), a bipartisan bill that would make it easier for plaintiffs and defendants to reach settlements in employment litigation.

In the letters, ACC and its 6,000-member Employment and Labor Committee stated that plaintiffs and defendants are able to reach employment litigation settlements more efficiently when taxes are lowered.

“Our members with extensive experience in employment law have seen first hand how the current tax system can prevent settlements and draw out expensive litigation,” said Veta T. Richardson, president and CEO of ACC. “The Civil Justice Tax Fairness Act would encourage more efficient settlements by removing those tax obstacles that deter both plaintiffs and defendants from settling disputes.”

Currently, the law taxes settlements and court awards for lost wages and non-economic damages, such as emotional distress. In contrast, recoveries for injury and sickness are excluded from the definition of taxable income. Additionally, courts now tax lost wages at higher rates, as lump-sum payments to plaintiffs must be attributed to a single taxable year. The Civil Justice Tax Fairness Act would remove non-economic damages from taxable income, and allow employees to average the income of lost wages over the years that the payments cover.

“As the law stands now, plaintiffs who anticipate higher taxes will demand higher settlements, making defendants less likely to acquiesce. This draws out the dispute and increases the likelihood of costly court battles,” Richardson said. “With the fair terms of this bill, settlements become a more attractive and cost-effective option for all parties.”

ACC wrote letters in the Senate to Ben Cardin (D-Md.) and Susan Collins (R-Maine), and in the House of Representatives to F. James Sensenbrenner, Jr. (R-Wisc.), Aaron Schock (R-Ill.), John Lewis (D-Ga.) and Robert Scott (D-Va.). ACC’s letters are available here: http://www.acc.com/advocacy/upload/ACCsupportsS1224-092613.pdf and http://www.acc.com/advocacy/upload/ACCsupportsHR2509-092613.pdf.

About ACC: The Association of Corporate Counsel (ACC) is a global bar association that promotes the common professional and business interests of in-house counsel who work for corporations, associations and other private-sector organizations through information, education, networking opportunities and advocacy initiatives. With more than 30,000 members in more than 75 countries, employed by over 10,000 organizations, ACC connects its members to the people and resources necessary for both personal and professional growth. By in-house counsel, for in-house counsel.® For more information, visit www.acc.com and follow ACC on Twitter http://twitter.com/ACCinhouse.  

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