Removal Of Double Taxation On Lawyer Contingent Fees Welcomed

by Glen Shapiro, LawAndTax-News.com, New York

15 October 2004

A little-noticed provision in the American Jobs Creation Act of 2004, passed by the Senate earlier this week, has been welcomed by civil rights and public interest groups.

According to a Legal Times report, the corporate tax bill, which now awaits the President's signature, contains a section which ends the double taxation of lawyer contingent fees in civil rights and public interest cases, amongst other types of litigation.

Under the current system, successful plaintiffs in such cases must pay tax on the entire damages award, despite the fact that their attorneys will take a large contingent fee out of the amount, upon which additional tax will be paid.

Several cases have been brought in the courts seeking to address the issue, and legislation designed to prevent such double taxation from occurring has been stalled for several years.

Speaking to the Legal Times, Bruce Fredrickson, vice president of public policy with the National Employment Lawyers Association, which fought for the bill ending double taxation of contingent fees to be passed, announced that:

"We are thrilled that Congress saw the wisdom of relieving individuals from having to pay taxes on fees that are paid to their attorneys, where the attorneys are already taxed on those same fees."

Co-sponsor of the original Civil Rights Tax Relief Act, Rep. Deborah Pryce (R-Ohio) also welcomed the news, announcing that:

"I am proud to say today we are putting a permanent provision in law that will protect people who risk their health and safety to help the government identify and prosecute fraud, and others who fight to protect their civil rights."

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