text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Civil Justice Tax Fairness Act of 
  2013''.
  
  SEC. 2. EXCLUSION FROM GROSS INCOME FOR AMOUNTS RECEIVED ON ACCOUNT OF 
                CERTAIN UNLAWFUL DISCRIMINATION.
  
      (a) In General.--Part III of subchapter B of chapter 1 of the 
  Internal Revenue Code of 1986 (relating to items specifically excluded 
  from gross income) is amended by inserting before section 140 the 
  following new section:
  
  ``SEC. 139E. AMOUNTS RECEIVED ON ACCOUNT OF CERTAIN UNLAWFUL 
                DISCRIMINATION.
  
      ``(a) In General.--
              ``(1) Exclusion.--Gross income does not include amounts 
          received by a claimant (whether by judgment or settlement and 
          whether as lump sums or periodic payments) on account of a 
          claim of unlawful discrimination.
              ``(2) Amounts covered.--For purposes of paragraph (1), the 
          term `amounts' does not include--
                      ``(A) backpay or frontpay, as defined in section 
                  1302(b), or
                      ``(B) punitive damages.
      ``(b) Unlawful Discrimination Defined.--For purposes of this 
  section, the term `unlawful discrimination' has the meaning given such 
  term by section 62(e).''.
      (b) Clerical Amendment.--The table of sections for part III of 
  subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
  amended by inserting before the item relating to section 140 the 
  following new item:
  
  ``Sec. 139E. Amounts received on account of certain unlawful 
                              discrimination.''.
      (c) Effective Date.--The amendments made by this section shall 
  apply to amounts received in taxable years beginning after December 31, 
  2012.
  
  SEC. 3. LIMITATION ON TAX BASED ON INCOME AVERAGING FOR BACKPAY AND 
                FRONTPAY RECEIVED ON ACCOUNT OF CERTAIN UNLAWFUL 
                EMPLOYMENT DISCRIMINATION.
  
      (a) In General.--Part I of subchapter Q of chapter 1 of the 
  Internal Revenue Code of 1986 (relating to income averaging) is amended 
  by adding at the end the following new section:
  
  ``SEC. 1302. INCOME FROM BACKPAY AND FRONTPAY RECEIVED ON ACCOUNT OF 
                CERTAIN UNLAWFUL EMPLOYMENT DISCRIMINATION.
  
      ``(a) General Rule.--If employment discrimination backpay or 
  frontpay is received by a taxpayer during a taxable year, the tax 
  imposed by this chapter for such taxable year shall not exceed the sum 
  of--
              ``(1) the tax which would be so imposed if--
                      ``(A) no amount of such backpay or frontpay were 
                  included in gross income for such year, and
                      ``(B) no deduction were allowed for such year for 
                  expenses (otherwise allowable as a deduction to the 
                  taxpayer for such year) in connection with making or 
                  prosecuting any claim of unlawful employment 
                  discrimination by or on behalf of the taxpayer, plus
              ``(2) the product of--
                      ``(A) the number of years in the backpay period and 
                  frontpay period, and
                      ``(B) the amount by which the tax determined under 
                  paragraph (1) would increase if the amount on which 
                  such tax is determined were increased by the average 
                  annual net backpay and frontpay amount.
      ``(b) Definitions.--For purposes of this section--
              ``(1) Employment discrimination backpay or frontpay.--The 
          term `employment discrimination backpay or frontpay' means 
          backpay or frontpay receivable (whether as lump sums or 
          periodic payments) on account of a claim of unlawful employment 
          discrimination.
              ``(2) Unlawful employment discrimination.--The term 
          `unlawful employment discrimination' has the meaning provided 
          the term `unlawful discrimination' in section 62(e).
              ``(3) Backpay and frontpay.--The terms `backpay' and 
          `frontpay' mean amounts--
                      ``(A) which are includible in gross income in the 
                  taxable year as compensation which is attributable--
                              ``(i) in the case of backpay, to services 
                          performed, or that would have been performed 
                          but for a claimed violation of law, as an 
                          employee, former employee, or prospective 
                          employee before such taxable year for the 
                          taxpayer's employer, former employer, or 
                          prospective employer, and
                              ``(ii) in the case of frontpay, to 
                          employment that would have been performed but 
                          for a claimed violation of law, in a taxable 
                          year or taxable years following the taxable 
                          year, and
                      ``(B) which are received on account of a judgment 
                  or settlement resulting from a claim for a violation of 
                  law.
              ``(4) Backpay period.--The term `backpay period' means the 
          period during which services are performed (or would have been 
          performed) to which backpay is attributable. If such period is 
          not equal to a whole number of taxable years, such period shall 
          be increased to the next highest number of whole taxable years.
              ``(5) Frontpay period.--The term `frontpay period' means 
          the period of foregone employment to which frontpay is 
          attributable. If such period is not equal to a whole number of 
          taxable years, such period shall be increased to the next 
          highest number of whole taxable years.
              ``(6) Average annual net backpay and frontpay amount.--The 
          term `average annual net backpay and frontpay amount' means the 
          amount equal to--
                      ``(A) the excess of--
                              ``(i) employment discrimination backpay and 
                          frontpay, over
                              ``(ii) the amount of deductions that would 
                          have been allowable but for subsection 
                          (a)(1)(B), divided by
                      ``(B) the number of years in the backpay period and 
                  frontpay period.''.
      (b) Clerical Amendment.--The table of sections for part I of 
  subchapter Q of chapter 1 of the Internal Revenue Code of 1986 is 
  amended by inserting after section 1301 the following new item:
  
  ``Sec. 1302. Income from backpay and frontpay received on account of 
                              certain unlawful employment 
                              discrimination.''.
      (c) Effective Date.--The amendments made by this section shall 
  apply to amounts received in taxable years beginning after December 31, 
  2012.
  
  SEC. 4. INCOME AVERAGING FOR BACKPAY AND FRONTPAY RECEIVED ON ACCOUNT 
                OF CERTAIN UNLAWFUL EMPLOYMENT DISCRIMINATION NOT TO 
                INCREASE ALTERNATIVE MINIMUM TAX LIABILITY.
  
      (a) In General.--Section 55(c) of the Internal Revenue Code of 1986 
  (defining regular tax) is amended by redesignating paragraph (3) as 
  paragraph (4) and by inserting after paragraph (2) the following:
              ``(3) Coordination with income averaging for amounts 
          received on account of employment discrimination.--Solely for 
          purposes of this section, section 1302 (relating to averaging 
          of income from backpay or frontpay received on account of 
          certain unlawful employment discrimination) shall not apply in 
          computing the regular tax.''.
      (b) Effective Date.--The amendment made by this section shall apply 
  to taxable years beginning after December 31, 2012.
target: Civil Justice Tax Fairness Act of 2013 - Amends the Internal Revenue Code to allow: (1) an exclusion from gross income for amounts received (whether by judgment or settlement, as lump sums or periodic payments) on account of a claim of unlawful discrimination; (2) income averaging for backpay and frontpay amounts received from such claims; and (3)&nbsp;an exemption from the&nbsp;alternative minimum tax (AMT) for any tax benefit resulting from the income averaging of amounts received from an unlawful discrimination claim. 
feat_title: Civil Justice Tax Fairness Act of 2013