Senator Wieckowski's bipartisan resolution calls on Congress to end double taxation on settlements and judgments

Consumer organizations support SJR 13, urging Congress to fix 2017 federal tax reform law

February 26, 2020

SACRAMENTO – State Senator Bob Wieckowski (D-Fremont) has introduced Senate Joint Resolution 13, urging Congress to support the End Double Taxation of Successful Civil Claims Act (S 2627), federal legislation aimed at changing the 2017 tax reform law.  Wieckowski is seeking to have the state Legislature support the new federal legislation to prevent consumers and their attorneys who prevail against corporate lawbreakers from being taxed twice on their judgments or settlements.

“The federal tax reform of 2017 created a horrible situation where the Internal Revenue Service will tax the plaintiff on the full amount awarded in a judgment or settlement, even though 40 percent might go to the attorney,” said Wieckowski, a member of the Senate Judiciary Committee.  “Then, the IRS turns around and taxes the attorney on the 40 percent.  The result is consumers who are victimized by corporations are victimized a second time by being taxed on phantom income they never receive. They could end up owing more in taxes than they receive after paying attorney’s fees. Without changes to the tax law, it could discourage victims from filing a claim even though their case is strong.”

U.S. Senator Catherine Cortez Masto (D-Nevada) is authoring S 2627 in Congress to end the unfair double taxation.

Many California consumer protection statutes provide for reasonable attorney’s fees to be awarded to consumers who prevail in civil action. These statutes are necessary to level the playing field between consumers and powerful corporations who have greater resources at their disposal.

“We applaud Senator Wieckowski and each of the bi-partisan co-authors for championing tax relief for consumers who are being victimized by unjust double-taxation of ‘phantom’ income when they win against corporate lawbreakers,” said Rosemary Shahan, president of Consumers for Auto Reliability and Safety.

SJR 13 is co-authored by Assemblymember Randy Voepel (R Santee), Assemblymember Mark Stone (D-Scotts Valley), Sen. Bill Dodd (D-Napa), Sen. Robert Hertzberg (D-Van Nuys), and Sen. Hannah-Beth Jackson (D-Santa Barbara). 

In addition to Consumers for Auto Reliability and Safety, it is supported by a number of consumer organizations, including CALPIRG, Center for Public Interest Law, Consumer Action, Consumer Watchdog, National Consumer Law Center, The Utility Reform Network, Public Law Center, California Association for Micro Enterprise Opportunity, California Reinvestment Coalition, Center for Responsible Lending, Consumer Federation of California, Housing and Economic Rights Advocates, Western Center on Law and Poverty and East Bay Community Law Center.