Ellen Overmyer Lloyd (J.D. 2008, Loyola University New Orleans; Associate, Stone Pigman, New Orleans) has published Comment, The Taxman Cometh: The Constitutionality of Taxing Compensatory Damages for Non-Physical Injuries, 54 Loy. L. Rev. 375 (2008).  Here is part of the Introduction:

This Comment will address Congress's power to tax and will specifically consider whether it encompasses the power to tax non-physical damage awards. This Comment will argue that taxation of non-physical damage awards is constitutional, both as “income” under the Sixteenth Amendment and alternatively as an “indirect tax” imposed uniformly under the Article I power to tax. Moreover, the decision to tax these types of awards is a policy choice that Congress is best able to make. Part II will examine the constitutional provisions relating to taxation: Article I of the Constitution and the Sixteenth Amendment. In particular, this section will examine how courts have interpreted the terms “direct tax” and “income.” Part II will also canvass the history and interpretation of section 104(a)(2), which currently provides an exclusion from gross income only for damages awarded on account of personal physical injuries or physical sickness. In effect, this places a tax on non-physical injury damage awards, and Part III will analyze whether taxing these awards is constitutional. Finally, Part IV will provide a conclusion.