Survivor Justice Tax Prevention Act

The Survivor Justice Tax Prevention Act would expand the federal tax exclusion for damages received in a civil case under Internal Revenue Code section 104(a)(2). Currently, damages for personal physical injuries or physical sickness are excluded from gross income. The bill would add damages received on account of sexual acts or sexual contact to this exclusion, but would continue to tax punitive damages. It also adds a modest changes to how such damages must be substantiated—allowing that the damages can be treated as on account of a sexual act or contact if the judgment or settlement states it, and clarifying that lack of medical records cannot automatically defeat that treatment. The effective date is for judgments and settlements entered after the date of enactment, with specific rules for when a judgment or agreement is treated as after enactment. Finally, the act directs the Treasury to run a public-awareness program about this exclusion. In plain terms, if someone receives money from a lawsuit or settlement specifically for sexual acts or sexual contact (non-punitive), that money would generally be excluded from taxable income, increasing the after-tax value of such damages for survivors or victims. Punitive damages would remain taxable. The bill also lowers some documentation hurdles for proving the purpose of the damages and adds outreach to inform the public about the exclusion.