Civil Rights Tax Relief Act of 2001

The Civil Rights Tax Relief Act of 2001 (H.R. 840) aims to change how the federal government taxes money awarded to individuals in civil rights and employment discrimination cases. Under this bill, settlements or court awards received for non-physical emotional distress or damage to reputation would be excluded from a person’s taxable gross income. Additionally, the bill allows individuals who receive backpay or frontpay in a single lump sum to use "income averaging," which prevents them from being pushed into a higher tax bracket by spreading the tax burden over the years the money was intended to cover.