Survivor Justice Tax Prevention Act (H.R. 2347): How It Could Make Your Settlement Tax-Free
A bipartisan bill advancing through Congress would exclude sexual assault and harassment settlement damages from federal income tax -- closing a gap that has forced survivors to pay taxes on compensation for their trauma. Here is the current status, how it works, and what it means for structured settlements.
H.R. 2347
119th Congress (2025-2026)
Bipartisan
Rep. Smucker (R) + Rep. Moore (D)
Apr 2026
Reported to House
The Problem: Survivors Are Taxed on Trauma Compensation
Under current federal tax law (IRC Section 104(a)(2)), settlement damages are only excluded from gross income if they are received "on account of personal physical injuries or physical sickness." This means survivors of sexual assault, sexual harassment, and other forms of sexual misconduct who receive settlements are required to pay federal income tax on their damages -- even though the harm is deeply personal and devastating.
The 2017 Tax Cuts and Jobs Act made this worse by adding Section 162(q), which denies employers a deduction for settlements subject to NDAs in sexual harassment cases -- but did nothing to help the survivors themselves. A survivor receiving a $500,000 settlement could owe $150,000+ in federal taxes, reducing their actual compensation to $350,000 or less.
As Congresswoman Gwen Moore stated when the bill advanced: this legislation "ensures that survivors are not further victimized by the tax code after enduring sexual violence."
What H.R. 2347 Would Do
The Survivor Justice Tax Prevention Act would amend the Internal Revenue Code to exclude from gross income any damages (other than punitive damages) received on account of sexual acts or sexual contact. Specifically, it would:
Exclude compensatory damages for sexual assault/harassment from federal income tax
Cover both lawsuit verdicts AND settlements (including confidential ones)
Apply to emotional distress damages arising from sexual acts
NOT cover punitive damages (those remain taxable)
Apply regardless of whether a physical injury occurred
Legislative Timeline
Mar 2025
Introduced in House (Rep. Smucker, Rep. Moore)
Apr 2026
Advanced by Ways and Means Committee
Apr 2026
Reported to House
2026
Awaiting House floor vote
TBD
Senate consideration
TBD
Presidential signature
Tax Impact Calculator: How Much Would You Save?
Current Law: Tax Owed
$65,000
If H.R. 2347 Passes: Tax Owed
$0
You Keep Extra
$65,000
Assumes 26% effective federal rate. Actual savings depend on filing status and total income. Punitive damages remain taxable under both scenarios.
EEOC Monetary Benefits: Harassment Settlements Are Growing
EEOC Sexual Harassment Monetary Benefits ($ Millions)
Source: EEOC Annual Performance Reports. Includes monetary relief obtained through litigation and administrative enforcement.
How This Connects to Structured Settlements
If H.R. 2347 passes, it creates a powerful planning opportunity when combined with structured settlements. Currently, survivors use Non-Qualified Assignments (NQAs) to spread taxable settlements over time and reduce their effective tax rate. If the bill passes, these settlements would become entirely tax-free -- similar to how physical injury settlements are treated today.
This means survivors could potentially receive structured tax-free payments through a Qualified Assignment (rather than an NQA), with all the benefits that entails: tax-free growth, guaranteed payments backed by A+ rated insurers, and protection from creditors in most states.
Even under current law, structuring a harassment settlement via MetLife's new NQA-FA can reduce the effective tax rate from 30%+ to 12-17% by spreading payments over multiple years. If H.R. 2347 passes, survivors who already structured their payments may be able to retroactively benefit depending on the bill's effective date provisions.
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