In less than two weeks, the application period for a federal law that allows exonerees to receive tax relief on any compensation they received fortheir wrongful conviction will expire even though many exonerees still don’t know the law exists or how to take advantage of it. But on Tuesday, the House took the first steps toward a remedy, unanimously passing a bill to extend the deadline for a full year.
The extension (H.R. 6438) applies to the Wrongful Conviction Tax Relief Act, signed into law in 2015 by President Barack Obama, which prohibited the federal government from taxing compensation paid to the wrongfully convicted. Retroactively, it opened the door for all exonerees, no matter the year they were compensated, to request an IRS refund of any tax, interest and penalties paid on that money.
However, there was a catch: There was no mechanism for notifying those eligible for a refund, and for anyone who had paid taxes prior to 2013, the law provided only a one-year window to claim a refund. And the expiration date, Dec. 19, is rapidly approaching.
Reps. Sam Johnson (R-Texas) and John Larson (D-Conn.), who introduced the original bill last year, also introduced the extension earlier this week. Both lawmakers had pledged just last month in statements made to The Huffington Post that they would fight to extend the deadline. The lawmakers were critical of the Internal Revenue Service, which they said failed to release its guidance on the law for six months, effectively cutting the original one-year timeline in half.
“Americans who have been wrongfully convicted suffered enough,” the lawmakers said in a joint statement on their new bill’s passage through the House. “While we can never right this wrong and return to them the time they spent behind bars, we can help these folks as they move forward with their lives. The deadline extension is the right thing to do, as is evidenced by its full support of the House.”
The extension proposal must still pass through the Senate and be signed by the president before it would go into effect. On Tuesday, Sen. John Cornyn (R-Texas) introduced a companion bill to Johnson and Larson’s House version.
Jon Eldan, an attorney in Oakland, California, and founder of the nonprofit After Innocence, has been spearheading an enormous effort to contact as many exonerees as possible before the deadline hits (The Huffington Post profiled that initiative in November). Eldan said that a one-year extension would allow “the time necessary to notify and assist the exonerees across the country who are eligible for the benefits that Congress intended with this law.”
Eldan’s After Innocence provides free post-release assistance to exonerees nationwide, helping to ensure that they have access to and actually use the health care and social services they are eligible for, and that they have legal assistance for any problems they might face upon re-entering society.
The National Registry of Exonerations lists 1,928 men and women who have been cleared in the United States since 1989. They served, on average, about nine years in prison and, collectively, lost 16,000 years behind bars. Some had been on death row. Some were minors when they were convicted or had intellectual disabilities. All of them had been swept into a justice system that failed them.
When released, these exonerees often are given little assistance as they try to readjust to freedom, update job skills and re-enter society after years, even decades, behind bars. Thirty-one states, Washington, D.C., and the federal justice system have enacted some form of compensation for the time spent unjustly imprisoned. But those statutes vary widely in terms of who qualifies and what is offered. The vast majority of exonerees do not receive meaningful compensation for having their lives derailed.
And many of those who had been compensated, either through a state law or a civil rights suit, faced an additional burden: paying taxes on that money. For years it was unclear if they were obligated to pay taxes on the compensation, because prior to the 2015 law, the status of money paid for wrongful incarceration was vague under IRS rules. If it was deemedcompensation for physical injury, it was not taxable. If it was determined to be for something else (such as lost wages), it was taxable.
Eldan has been working day and night for the better part of a year trying to identify, contact and assist as many people on the National Registry of Exonerations as he can to guide them toward any tax relief they may be eligible for. Using data compiled largely from media reports that the registry tracks, he identified about 750 people who received some form of compensation for being wrongfully convicted. But the registry does not compile contact information for those on the list, so Kroll, a large corporate investigations firm, is donating its help, and law students from the College of William & Mary and Stanford University are also digging up contact information. When Eldan does reach eligible exonerees, he can refer them to the Reed Smith LLP law firm, which coordinates free assistance for filing refund claims.
In a letter 23 innocence organizations, including After Innocence, sent to Johnson and Larson last month, the groups urged the lawmakers to move to extend the deadline by two years. They indicated that there would not be enough time to reach all of those Eldan has identified as having received compensation nor the 1,000 more whose compensation status remains unknown.
Eldan had contacted more than 330 wrongfully convicted individuals nationwide and identified nine who may qualify for tax relief when he spoke with HuffPost in November.