On Monday, the New Jersey State Assembly approved a bill that would provide a substantial tax benefit to victims of unlawful workplace discrimination, retaliation, or other violations of laws that regulate any aspect of the employment relationship. This bill was first introduced in the New Jersey State Senate in January 2018, and has enjoyed widespread, bi-partisan support as it has worked its way through the legislative process. Monday’s approval by the Assembly, by a unanimous vote of 79 to 0, was the final legislative hurdle. If Governor Phil Murphy signs the bill into law, it will be a great victory for victims of workplace discrimination and retaliation across New Jersey.
In 2004, the United States Congress passed the Civil Rights Tax Relief Act. The Civil Rights Tax Relief Act was intended to, among other things, eliminate a flaw in the tax treatment of awards won by plaintiffs who successfully prosecuted claims of discrimination or retaliation. Prior to 2004, a plaintiff who received an award in a discrimination or retaliation case were required to include in their gross income the entire amount of that award.
This was the case, despite the fact that a portion of that award constituted attorney’s fees and costs that were awarded along with the amount awarded for the plaintiff’s damages. Not only did this tax treatment negatively impact those plaintiffs, it also subjected that portion of the award to double taxation, as the attorneys who ultimately collected those fees and costs were also required to include that amount in their gross income. Congress cured this flaw by exempting that portion of such a plaintiff’s award from their gross income. In approving the legislation on Monday, New Jersey is finally following suit.