This week, Assaf Harpaz (Georgia; Google Scholar) reviews a new work by Katherine Pratt (Loyola LA; Google Scholar), Aligning Reparations and Taxation, Wm. & Mary J. Race, Gender & Soc. Just. (forthcoming).

In Aligning Reparations and Taxation, the author makes an exceptional contribution to the tax literature by examining the nontaxation of reparation remedies. Absent a statutory exclusion, current tax law generally treats reparation remedies as taxable income to the recipient. The author argues that this tax treatment undermines the rehabilitative and restorative objectives of reparations. The author proposes a new statutory tax exclusion for reparation remedies, grounded in critical normative frameworks and procedural fairness in tax administration.

The article begins by describing how the tax law applicable to the receipt of reparation remedies has been inconsistent, increasingly taxing their receipt, and thus eroding the rehabilitative remedial goals of reparations. The author argues that the critical approaches to law and policy are particularly relevant when considering the taxation of reparation remedies, which focus on how the law perpetuates power to the disadvantage of subordinated groups. This paper is therefore well-situated within the growing body of work on Critical Tax Theory and Law, as well as the literature on Law and Political Economy, as the author contends that both approaches support a tax exclusion of reparation remedies. In this context, the author invokes the helpful example of the § 1014 stepped-up basis rule as a benefit that the tax exclusion for remedies could help offset. In addition, the author explains that procedural fairness in tax administration is relevant in deciding whether to tax the receipt of reparation remedies. As history has shown, treating reparation remedies as income increases the administrative burdens on parties receiving the remedies, with specific reference to the system of tax information reporting (i.e., Form 1099).

The article then turns to analyzing modern-day tax law, the broad income inclusion standard, and relevant exclusions with respect to reparation remedies. In past decades, Congress and the IRS have authorized several exclusions on the receipt of reparation remedies, based on a combination of: (1) the General Welfare Doctrine (GWD), (2) § 104(a)(2), and (3) specific federal legislation.

The GWD, developed by the Treasury Department and IRS, has been used to repeatedly exclude government payments and benefits from income. The GWD and its connection to reparations is implicit in multiple rulings that permitted members of Native American Indian tribal nations to exclude federal government payments on this basis. Meanwhile, the § 104(a)(2) exclusion for compensatory damages received on account of personal physical injury or personal sickness (prior to its narrowing in 1996) authorized the exclusion of reparations payments for Japanese Americans interned during World War II under a 1988 statute (which included “human suffering” or the loss of “personal rights”). The author argues that the rationales for § 104(a)(2) continue to be relevant in the reparations context, even though the current version of § 104(a)(2) applies only in the case of personal physical injuries.

In some cases, specific federal legislation was enacted to exclude the reparation payment from income. For example, in 2001, Congress enacted a statutory exclusion for payments made to victims of the Holocaust. The author suggests that the legislation, which is not part of the Internal Revenue Code, is consistent with the general welfare doctrine and can serve as a model for a statutory exclusion of reparations. Another relevant example is § 139F of the Code, which relates to the state compensation payments for wrongful incarceration.

Nevertheless, the receipt of reparation remedies is more likely to be taxed now than in the past, due to the 1996 narrowing of the personal injury exclusion and the incomplete codification of the reparations strand of the GWD. The wrongful dispossession of property (Bruce’s Beach case), and noncash benefits such as discharge of indebtedness as a reparation remedy (Pigford) are noteworthy examples. In Pigford, the IRS conceptualized the claims as discrimination claims that did not qualify for the personal injury exclusion, rather than as excludable reparation claims. Pigford also raises significant procedural justice concerns because thousands of claimants lacked individual expert tax representation, and the tax issues were complex and fact-specific for each individual claimant. Without new legislation from Congress, however, the IRS did not allow exclusion of the Pigford remedies, thus failing to mitigate the economic harm to Black farmers.

The author asserts that the rationales for the § 104 and GWD exclusions apply with equal or greater degree to reparation remedies. The article then introduces the proposal: that Congress enact a comprehensive statutory exclusion for the receipt of reparations. The proposal intends to reduce wealth inequality, prevent the tax law from undermining the rehabilitative remedial goals of reparations, and reduce potential procedural unfairness in tax administration. The author also recommends that Congress amend § 108(a)(1) relating to cancellation of indebtedness income in order to exclude cancellation of debt arising in the context of redressing systemic discrimination against members of subordinated groups. At this point, it may be worthwhile to consider whether a similar exclusion should apply at the state levels. Additionally, the author may wish to elaborate on the proposal’s prospects of adoption and implementation, as well as how the nontaxation of reparations might influence the broader discussion surrounding reparations claims and the willingness of policymakers to adopt reparative measures. The article concludes with an appendix, outlining the proposed income tax exclusion for the receipt of reparation remedies, which provides that any excludable reparation remedies received by an eligible individual shall not be includable in gross income.

In summary, this project offers a robust and comprehensive analysis of the legal landscape regarding the federal taxation of reparations. It provides a compelling account of the historical background and normative justifications for excluding reparations from recipients’ income, and makes a valuable contribution that will help inform ongoing discussions surrounding taxation and reparations.

Here’s the rest of this week’s SSRN Tax Roundup:

Reuven S. Avi-Yonah (Michigan), Can the Corporate Tax be Delegated? (May 18, 2026)

Jeffrey Benson (Syracuse), Fiscal Architecture for a Just Society: A Comprehensive Tax and Revenue Policy Paper (May 21, 2026)

Miranda Perry Fleischer (San Diego), Symmetry and Speech: Nonprofits and the First Amendment, 103 Wash. U. L. Rev. (forthcoming 2026)

David Gamage (Missouri) & Darien Shanske (UC Davis), Against Doctrinal Siloing: Harmonizing Fiscal Federalism and the U.S. Constitution, 103 Wash. U. L. Rev. (forthcoming 2026)

David Gamage (Missouri) & John R. Brooks (Fordham), The Federal Taxing Power in Its New Constitutional Era, Tax L. Rev. (forthcoming 2026)

Claire A. Hill (Minnesota), What Cognitive Psychologists Should Find Interesting About Tax, 17 Psychonomic Bull. & Rev. 180 (2010)

Tarun Jain (Supreme Court of India), Taxing Supply of “Obligation to Refrain from an Act, or to Tolerate an Act or a Situation”: High Court Elucidates Indian GST Law Provisions (May 20, 2026)

Fabian Kratzlmeier (Max Planck Inst. for Tax L. & Pub. Fin.), The Tax Creditor Under European Insolvency Law: Special Treatment, Equal Treatment, or Even Worse? (May 13, 2026)

Sarah B. Lawsky (Illinois), Limiting Inconsistencies in Legal Languages, 28 Vand. J. Ent. Tech. L. 765 (2026)

Katherine Pratt (Loyola L.A.), Aligning Reparations and Taxation, J. of Race, Gender & Social Justice (forthcoming 2026)

Diane M. Ring, Assessing Decision-Making in Global Tax Organisations, 2025 Brit. Tax Rev. 61

Tamir Shanan (College of Management) & Doron Narotzki (Akron, Daverio Sch. Acct.), Taxation of Cross Border Migrations: Re-Evaluating the Allocation Between Home Country and Host Country, in Fairness in International Taxation 173 (2025)

István Simon, Cryptocurrencies in National Laws – Hungary (May 8, 2026)Manoj Viswanathan (UC Law SF), Toward Issuer-Based Certification of Qualified Small Business Stock (May 7, 2026)

Steven Utke (Connecticut. Dept. Acct.), Estimates of Revenue from Closing the Carried Interest Tax ‘Loophole’ are Highly Uncertain and Likely Overstated (May 11, 2026)