Survivor Justice Tax Prevention Act

If passed, survivors of sexual assault, harassment, and abuse would receive the full dollar amount of settlements without federal income tax liability. Current law requires survivors to pay income tax on most damages (except those awarded specifically for physical injuries), effectively reducing net recovery. For example, a survivor receiving a $100,000 settlement would owe federal income tax on that amount under current law; under this bill, the full $100,000 becomes tax-free (unless part is designated punitive damages). Precedent: the Uniform Tax Treatment of Settled Tobacco Litigation Act of 1998 created a similar tax exclusion for tobacco settlement payments, which continues in effect. The bill's burden-of-proof shift (making settlement language credible evidence under IRC § 7491) reduces IRS authority to challenge survivor claims, a significant change in audit and dispute procedures. The 2022-2024 wave of institutional abuse settlements (Boy Scouts bankruptcy, USA Gymnastics, diocesan abuse cases) demonstrates the scale of survivors affected; making these settlements tax-free would increase net recovery but also increase federal revenue loss.