Legislation would provide tax break for the wrongfully convicted

April 19, 2012 – With DNA evidence helping lead the way toward exoneration of those who have been falsely convicted and wrongfully imprisoned, a bill in Congress introduced last month by Congressmen Sam Johnson (R-TX) and John Larson (D-CT), would institute fairness to countless men and women who have suffered indignities.

In short, H.R. 4241 would amend the Tax Code to allow those who win their freedom for crimes they did not commit to receive damage awards on a 100% income tax-free basis.  The bill is currently in committee.

A few years ago, I had the privilege of assisting several exonerated prisoners make structured settlement choices for the civil suits they successfully pursued following their release from prison.  Fortunately, they had expert legal counsel who advocated vigorously on their behalf to win their freedom.

In each case, these men spent more than a decade in prison for crimes they were ultimately vindicated of.  The structured settlements they selected enabled them to lay the foundation for a financially secure future and helped them, to the extent possible, move past their negative experiences of being incarcerated for something they didn’t do.

Financial security after maximum security gave them peace of mind they hadn’t know in years.

So inspired was I by my experience in helping these men, I joined the Board of Directors for Innocence Matters, a California nonprofit dedicated to helping prevent wrongful convictions through education, prevention and reform.

Finn Financial Group resoundingly applauds Reps. Johnson and Larson for their courage in recognizing the disparity that exists in taxation of damages for this important class of Americans whose liberties were denied them and urges the bill’s passage.

For an excellent analysis of this matter, some historical perspective and the existing challenges giving rise to the need for this bill, we recommend the March 30, 2012 edition of Tax Alert by renowned taxation of damages tax attorney Robert W. Wood.