Bill Introduced to Exempt Wrongfully Convicted from Federal Income Taxes
On December 6, 2007, U.S. Senators Charles E. Schumer (D-NY) and Sam Brown (R-KS) introduced a bill to exempt wrongfully convicted former prisoners from having to pay federal income tax on their compensation awards. The bill would also exempt exonerees from paying taxes on the first $50,000 of annual income, and would provide their employers with payroll tax credits for the lesser of 15 years after release or the number of years spent in prison.
More than 200 prisoners have been exonerated by DNA evidence and over 400 by other types of evidence since 1989. Twenty-two states have passed compensation laws for exonerated prisoners. California, Massachusetts and Vermont exempt such compensation payments from state taxes. Federal law, however, is unclear as to whether compensation for wrongful convictions should be taxed as income or exempted like a personal-injury award.
Some exonerees have challenged their federal income taxes in court and received exemptions. Most either pay the taxes or ignore the tax bill, according to attorney Barry C. Scheck, co-founder of the Innocence Project at the Benjamin N. Cardozo School of Law.
“The criminal justice system is not perfect, so at the very least, we ought to do what we can to make amends to the people who were wrongly convicted – a very small number of people who pay a big, big price for those mistakes,” said Senator Schumer. “The compensation they receive should not be taxed; that’s certainly like throwing salt on a very deep wound.”
David Pope is likely to agree. Following his release from a Texas prison in 2001, where he served 15 years for a rape he didn’t commit, Pope received $385,000 in compensation. After renting an apartment, buying a car, paying his mother’s debts and traveling overseas, little was left when the IRS sent him a bill for $90,000.
“I didn’t know I had to pay taxes over it until the government started sending me letters,” Pope said. Still carrying the stigma of being an ex-prisoner, he is trying to find regular employment to pay his tax bill.
The federal legislation co-sponsored by Senators Schumer and Brown to provide relief to the wrongfully convicted (S.2421) is pending in the Senate Finance Committee, and appears unlikely to pass this year.
Source: New York Times
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