Business Law

Business Law News 2016, Issue 3

Special Retroactive Tax Exemption Enacted For Wrongful Conviction Settlements

Robert W. Wood

Robert W. Wood is a tax lawyer with www.WoodLLP.com, and the author of numerous tax books including Taxation of Damage Awards & Settlement Payments (www.TaxInstitute.com). This discussion is not intended as legal advice.

The Wrongful Convictions Tax Relief Act is a long overdue change to the tax code.1 The new law amends the Internal Revenue Code ("IRC") to allow a wrongfully convicted individual to exclude civil damages, awards, and other compensation paid for wrongful incarceration.2

Few of us can imagine what it would be like to be convicted and imprisoned for crimes we did not commit. In 2015, wrongfully convicted individuals exonerated by DNA evidence served an average of 14.5 years behind bars.3 Since the first DNA exoneration in 1989, wrongfully convicted people served more than 3,809 years in prison before being exonerated.4 Whether viewed individually or in the aggregate, the number of wrongful convictions is astounding.

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