Van Hollen, Cortez Masto, Merkley Introduce Legislation to Protect Victims of Corporate Fraud and Abuse

U.S. Senators Chris Van Hollen (D-Md.), Catherine Cortez Masto (D-Nev.), and Jeff Merkley (D-Ore.) introduced the End Double Taxation of Successful Civil Claims Act. This legislation will protect American consumers’ right to sue fraudulent or abusive corporations by eliminating a glitch in the tax code that requires plaintiffs who win these type of cases to pay income tax on money awarded to pay attorneys’ fees.

“Consumers who have been defrauded by large corporations shouldn’t be further penalized by our tax code. The legislation makes a common-sense fix to ensure that the tax code does not punish individuals who have been victims of corporate wrongdoing. I’m proud to join Senator Cortez Masto in introducing this bill, and I urge my colleagues to right this wrong immediately,” said Senator Van Hollen. 

“Victims of fraud or abuse shouldn’t be punished for holding corporate bad actors accountable,” said Senator Cortez Masto. “Yet under current law, consumers who win corporate exploitation or sexual harassment cases are forced to pay income taxes on court-ordered compensation for attorney fees, even though this money will never make it to the consumers’ pockets. That’s why I’ve introduced legislation to abolish these unfair taxes, protect people and eliminate this powerful disincentive for people seeking justice from fraudulent and abusive companies.”  

“For generations, brave Americans have gone to the courts to hold abusive and fraudulent corporations accountable for their actions, and to make things better for the next generation,” said Senator Merkley. “But alarming provisions in our tax code actually punish consumers for winning lawsuits against companies, by taxing both the money courts grant them and the money they are awarded to pay their legal fees. This unfair rule makes it that much harder for Americans to pursue justice, and I’m urging my colleagues on both sides of the aisle to join together to fix it without delay.”

BACKGROUND:

A provision the U.S. tax code, which was made worse by the 2019 Republican tax bill, unfairly taxes people who sue corporations for abuse, fraud or sexual harassment on the legal judgments they win. Plaintiffs who sue companies for damages and win their cases are currently awarded money in damages and additional money to pay attorneys’ fees. But the tax code makes plaintiffs pay income tax on the full amount awarded by a court, even when they personally receive only damages, not the attorney’s fees. The End Double Taxation of Successful Civil Claims Act will eliminate federal income tax on money awarded to pay attorneys’ fees.

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