Congress makes sexual assault settlements tax-free for survivors

What it does

This bill amends the tax code to exclude from taxable income any damages (except punitive damages) that sexual assault survivors receive through court settlements or agreements. Currently, survivors must pay federal income tax on these settlement amounts; this bill makes those payments tax-free, similar to existing tax treatment for other personal injury settlements. The bill also shifts the burden of proof so that if a settlement explicitly states damages are for sexual acts or contact, the IRS must accept that characterization without requiring additional evidence.

Why we flagged it

The bill's sole operative mechanism is a tax exclusion for non-punitive damages in sexual assault cases, paired with a burden-of-proof rule favoring survivors. It is straightforward victim-protection legislation with no hidden riders or narrow beneficiaries.

What the text implies

• The burden-of-proof shift (treating settlement language as 'credible evidence' and deeming the taxpayer to have met section 7491(2) requirements) may reduce IRS audit scrutiny of sexual assault settlements, potentially affecting tax compliance verification in edge cases where settlement amounts are unusually large or characterization is disputed.
• The bill's effective date applies only to decisions and agreements made after enactment, but includes a special rule allowing survivors to amend or replace pre-enactment agreements to claim the exclusion retroactively, which could create a window for amended returns and IRS processing delays.
• The public awareness campaign requirement (Section 6) delegates to Treasury and DOJ to educate survivors about the tax benefit, but does not mandate funding or timelines, leaving implementation scope uncertain.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

Sexual assault survivors receive financial relief without federal tax liability, reducing the effective cost of their settlements and removing a perverse incentive that penalizes victims. The burden-of-proof shift protects survivors from IRS challenges to settlement characterizations, lowering litigation risk and administrative friction.

Named in the bill

Internal Revenue Service (IRS), Department of Treasury, Department of Justice Office on Violence Against Women, Sexual assault survivors

Where it stands

3 cosponsors: 2 Democrats, 1 Republicans.

• Mar 25, 2025 — Introduced · Congress.gov: “Introduced in House”
• Mar 25, 2025 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”
• Mar 25, 2026 — Markup held in committee · Congress.gov: “Committee Consideration and Mark-up Session Held”
• Mar 25, 2026 — Reported out of committee · Congress.gov: “Ordered to be Reported in the Nature of a Substitute by the Yeas and Nays: 41 - 0”
• Apr 27, 2026 — Passed the House · Congress.gov: “On motion to suspend the rules and pass the bill, as amended Agreed to by voice vote. (text: CR H3110)”
• Apr 27, 2026 — Floor vote scheduled · Congress.gov: “Mr. Smith (MO) moved to suspend the rules and pass the bill, as amended”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

2 lobbying clients named this bill on 3 disclosure filings across 3 quarters, Dec 2025 to Jun 2026. Those filings disclosed $97,000 in lobbying spend. A filing names 2 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 41% of bills with at least one filing.

Lloyd Smucker, the sponsor, reported $853,756 in PAC receipts in the 2026 cycle.

• American Association of Settlement Consultants — $90,000 on 2 filings
• National Structured Settlements Trade Association — $7,000 on 1 filing

Lobbying Disclosure Act filings through Jul 17, 2026. A filing shows who paid to lobby on a bill it names, not what changed.