February 03, 2023

Wyden, Colleagues Introduce Bipartisan Bill to Exempt Trafficking Survivors’ Restitution from Federal Taxes

Washington, D.C. – U.S. Senator Ron Wyden this week joined colleagues to introduce bipartisan legislation that would to exempt civil damages or restitution given to human trafficking survivors from federal income taxes. The bill would also codify current Internal Revenue Service (IRS) guidance that makes restitution payments made to survivors in criminal cases free from federal income taxes.

 “Human trafficking survivors have been through true horrors, and the last thing they need is a big tax bill right when they’re trying to recover from unimaginable traumas,” said Wyden, who chairs the Senate Finance Committee. “This legislation will make it easier for survivors to pursue justice against their abusers and rebuild their lives by exempting critical financial relief from federal taxes. I’m all in to get this bill over the finish line.”

Under the Internal Revenue Code, civil damages awarded to human trafficking victims are considered taxable income. The Human Trafficking Survivor Tax Relief Act would exempt civil damages from federal income taxes, allowing survivors to file their taxes without worry of penalties or fees for not reporting awarded damages as income. It also would provide parity between criminal restitution, which is tax-exempt through IRS Notice 2012-12, and civil damages, which are not. Often, human trafficking survivors’ only recourse to pursue justice against traffickers is through civil litigation. Finally, the bill codifies IRS Notice 2012-12, ensuring that restitution payments made in criminal case remain tax-free.   

The Human Trafficking Survivor Tax Relief Act is co-sponsored by U.S. Senators John Cornyn, R-Texas, James Lankford, R-Okla., and Kyrsten Sinema, I-Ariz. The bill is supported by the Freedom Network USA, the Polaris Project, & Rights4Girls. Other organizations who have supported past-efforts include the End Child Pornography and Trafficking (ECPAT), the National Association to Protect Children, the Coalition Against Trafficking in Women (CATW), Shared Hope International, the National Children’s Alliance, Freedom Network USA, the Alliance to End Slavery and Trafficking (ATEST), and the Coalition to Abolish Slavery & Trafficking (CAST).