Thursday, August 24, 2006
Yup, you read it right. An important case, Murphy v. IRS, 05-5139 (D.C. Cir. Aug. 22, 2006), has come down from the D.C. Circuit Court of Appeals finding that the taxing of emotional distress damages awarded in an employment retaliation case under the Internal Revenue Code is unconstitutional under the 16th Amendment because such legal relief is not "income" under the Amendment.
There has been a truckload of commentary that has come out about this case, including whether because something is not income under the 16th Amendment the Congress nevertheless has power to tax the award under its other enumerated powers. Paul Caron at TaxProf has this very helpful post summarizing all the blogospheric reaction to this important case. Additionally, here is a nice summary of the case itself from Ross' Employment Law Blog.