For years, wrongfully incarcerated individuals who received compensation for their time behind bars were required to pay income taxes on the settlements they received from government organizations responsible for their wrongful incarceration. Congress changed the law in 2015 to exempt exonerees from paying income taxes on civil damages, restitution or other monetary awards received as compensation for their wrongful incarceration. Despite the passage of the Wrongful Conviction Tax Relief Act of 2015, many exonerated individuals remain unaware of their right to a refund of tax paid on their compensation, much less the applicable filing deadlines.
Enter the Exonerees’ Tax Assistance Network led by Kelley C. Miller at Reed Smith, LLP, who, with Lawrence Sannicandro of McCarter English, LLP and After Innocence founder Jon Eldan, recruited tax lawyers to represent eligible exonerees in their quest for refunds.
Kostelanetz & Fink is proud to report that counsel Paul T. Butler heeded the call in 2018 and began assisting exonerated individuals in securing tax refunds and associated interest for income tax paid on their settlements. Paul is representing two military service members convicted in military courts and later exonerated. These cases have been especially tough for exonerees given the unique procedures of the armed services. Unlike most civilian exonerees, exonerated military service members generally receive compensation for their wrongful conviction as wages, rather than lump sum settlements. As a result, bureaucratic hurdles unique to the military present difficulties in obtaining proper records in a timely fashion.
Notwithstanding those unique challenges, Paul has been able to secure refunds and interest payments on behalf of his clients. After Innocence reports that it has helped to coordinate approximately 40 claims and recovered approximately $1.5 million with an additional $500,000 in debts that were cancelled as a result these volunteer efforts.