In the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), Congress added a new exclusion from income under section 139F of the Internal Revenue Code. Under this new exclusion, a wrongfully incarcerated individual does not include in income any civil damages, restitution, or other monetary award received that relates to his or her incarceration for the covered offense for which he or she was convicted (Wrongful Incarceration Exclusion).
Q1: Does the Wrongful Incarceration Exclusion also apply to compensatory or statutory damages and restitution that a wrongfully incarcerated individual receives in a criminal matter?
A1: Yes. The Wrongful Incarceration Exclusion also applies to compensatory or statutory damages and restitution that a wrongfully incarcerated individual receives in a criminal matter that relates to his or her incarceration for the covered offense for which he or she was convicted.
Q2: Who is a wrongfully incarcerated individual under the Wrongful Incarceration Exclusion?
A2: A wrongfully incarcerated individual is an individual who was convicted of a covered offense, served all or part of a sentence of imprisonment relating to the covered offense, and meets any one of the following three requirements:
- The individual was pardoned, granted clemency, or granted amnesty for that covered offense, because the individual was innocent of that covered offense; or
- The judgment of conviction for the individual for that covered offense was reversed or vacated and the indictment, information, or other accusatory instrument for that covered offense was dismissed; or
- The judgment of conviction for the individual for that covered offense was reversed or vacated and the individual was found not guilty at a new trial after the judgment of conviction for that covered offense was reversed or vacated.
Q3: What is a covered offense?
A3: A covered offense is any criminal offense under federal or state law, and includes any criminal offense arising from the same course of conduct as that criminal offense.