Washington, D.C. – Today, U.S. Senator Catherine Cortez Masto reintroduced legislation to protect American consumers who sue corporations after being defrauded. The End Double Taxation of Successful Consumer Claims Act will help ensure people who win fraud cases receive the full amount of damages they are awarded, rather than being unfairly taxed on fees awarded to their attorneys. The bill is cosponsored by Senators Michael Bennet (D-Colo.), Jeanne Shaheen (D-N.H.), Patty Murray (D-Wash.), Cory Booker (D-N.J.), and Tim Kaine (D-Va.).
“We should be encouraging Nevadans who are victims of fraud and abuse to hold bad actors accountable,” said Senator Cortez Masto. “Right now, the tax code unfairly punishes people who successfully sue corporations for fraud. My bill would make sure consumers who win fraud cases get their award and are not forced to pay thousands of dollars in taxes on funds awarded to their attorneys.”
Currently the U.S. tax code unfairly penalizes people who sue corporations or companies for abuse or fraud. Consumers who win their cases often receive money to cover damages and their lawyer fees. But the tax code makes plaintiffs pay income tax on the full amount awarded by a court, even though most of that money goes to attorneys’ fees and not directly to the consumers. Many consumer fraud cases award only small amounts in damages, and if the consumer is taxed for the total amount they often end up owing more money in taxes than they are personally awarded. The End Double Taxation of Successful Consumer Claims Act will ensure that consumers are not liable for federal income taxes on money awarded to their attorneys.
As the former top law enforcement official in Nevada, Senator Cortez Masto has been a leading voice in the fight to protect consumers from fraud throughout her career. She sounded the alarm on increasing check fraud scams, which cost consumers millions of dollars each year. She introduced legislation to protect and support whistleblowers reporting wrongdoing to the Consumer Financial Protection Bureau, and her bipartisan legislation to deter disruptive and potentially harmful phone calls and texts was signed into law in 2020.
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