Washington, D.C. – U.S. Senators Catherine Cortez Masto (D-Nev.) and Michael Bennet (D-Colo.), along with Representative Steven Horsford (D-Nev.-04), re-introduced 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.
“It’s past time we change outdated tax laws that are punishing consumers who take on big corporations after becoming victims of fraud,” said Senator Cortez Masto. “My commonsense legislation will make it easier to hold bad actors accountable and make sure defrauded Nevadans get the compensation they deserve.”
“Coloradans should be able to hold corporations accountable in court, but our tax code too often punishes successful consumer claims and can deter Americans from bringing these cases in the first place,” said Senator Bennet. “I’m glad to join my colleagues to introduce this legislation and make it easier for consumers to stand up to fraud and abuse.”
“After getting justice in court, people shouldn’t have to pay taxes on the money others make from their case. I believe our tax system should be fair and equitable. This legislation ensures that Nevadans and other Americans are made whole, and in the end, don’t pay more for an award granted by a jury or the courts,” said Congressman Horsford.
Currently the U.S. tax code unfairly penalizes consumers 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 the consumers personally receive only damages, not the attorneys’ fees. Many consumer fraud cases award only small amounts in damages, and if the consumer is taxed for the total amount, the taxes they owe often end up exceeding the amount 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 more than $800 million last 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.