Bill > A3614

Introduced Session

This bill provides a gross income tax exclusion for the amount of attorney's fees and costs received by a State taxpayer in connection with unlawful discrimination, unlawful retaliation, and certain whistleblower claims and actions. For purposes of the bill, the terms "attorney's fees" and "costs" should be liberally construed to include all expenditures for the victim or whistleblower to be made whole under the law, including, but not limited to, attorney's fees, paralegal fees, court costs, litigation expenses, and expenses for experts and consultants. Employment Discrimination Matters This bill provides the victim of certain unlawful discrimination or unlawful retaliation with a gross income tax exclusion for the attorney's fees and costs received in connection with claims or actions for that discrimination or retaliation. The bill does not affect the current system for determining how New Jersey eventually taxes those fees and costs to the attorneys. In 2004, Congress enacted the Civil Rights Tax Relief Act as part of the American Jobs Creation Act of 2004. The Civil Rights Tax Relief Act was designed to eliminate the double taxation of attorney's fees and costs at the federal level to both the attorney who is ultimately paid the fees and the victims of discrimination or retaliation. The Act accomplished that goal by allowing the victim to take an above-the-line deduction for the recovery or payment of attorney's fees and costs recovered in connection with any action or claim of unlawful discrimination or retaliation. That law did not affect the federal taxation of the attorney's fees to the attorneys. New Jersey law was not amended when Congress enacted the Civil Rights Tax Relief Act in 2004. As a result, the attorney's fees and costs that victims of unlawful discrimination or retaliation receive in connection with such claims are taxable to both the law firm that is ultimately paid the fees and the victim at the State level, although the victim never actually receives the fees. Qui Tam Matters The bill also provides a gross income tax exclusion for the amount of attorney's fees and costs received by, and payments to other relators made by, a State taxpayer as part of an award recovered under the federal False Claims Act, 31 U.S.C.s.3730(b), the "New Jersey False Claims Act," P.L.2007, c.265 (C.2A:32C-1 et seq.), or any other similar qui tam action. A qui tam action permits a private citizen whistleblower to expose evidence of unlawful conduct against the government, generally in connection with fraud perpetrated in the administration of a government program, and sue the wrongdoer on behalf of the government, though the government may ultimately join the action. A whistleblower may, in turn, become eligible for a monetary award that is based on a percentage of the amount recovered. However, qui tam proceedings may involve costs incurred by the whistleblower in providing assistance, including but not limited to private attorney's fees, court costs, and payments to other relators (other private whistleblowers who discover related unlawful conduct) pursuant to a sharing agreement.

AI Summary

Committee Categories

John Burzichelli (D)*,  Carol Murphy (D)*, 

Substituted by S784 (1R) (on 12/17/2018)