ACTION ALERT: Holocaust Survivors Tax Fairness Act of 2001 April 23, 2001

April 23, 2001

TO:	JCPA Member Agencies
FROM:	Ethan Felson, Director of Domestic Concerns Reva Price, Washington Representative
RE:	Holocaust Survivors Tax Fairness Act of 2001

On April 7, 2001 Senator Fitzgerald (R-IL) and several Senate colleagues introduced the Holocaust Survivors Tax Fairness Act of 2001 (S. 749): "A bill to provide that no Federal income tax shall be imposed on amounts received by victims of the Nazi Regime or their heirs or estates."

ACTION: Please contact your legislators and urge them to co-sponsor the Holocaust Survivors Tax Fairness Act of 2001. Thank those who already have expressed their support for this important legislation and ask them to help this bill become law. Original Co-sponsors who joined Senator Fitzgerald in introducing this legislation include: Schumer (NY), Jeffords (VT) , Bingaman (NM), DeWine (OH), Clinton (NY), Collins (ME), Lieberman (CT), McCain (AZ), Kerry (MA), Feinstein (CA), Snowe (ME), Boxer (CA), Smith (OR), Torricelli (NJ). There is no House companion bill yet. JCPA staff will let you know when that will happen.

BACKGROUND: Holocaust survivors have been receiving various types of compensation payments from Germany and Austria since the 1950s. Recent efforts to secure compensation payments for former slaves and forced laborers who suffered under the Nazi regime and to obtain restitution of stolen Holocaust-era assets, will result in survivors receiving additional payments over the next several years. In light of these developments, there is a need for comprehensive legislation that will clarify and ensure that all compensation and restitution payments, whether in the form of cash or property, received by Holocaust survivors and/or their heirs are not subject to federal taxation.

The Internal Revenue Service has issued several rulings exempting certain Holocaust compensation payments from taxation. Congress, however, has never passed legislation that would provide broad tax exemption for all Holocaust-related payments. A measure did pass the Senate as an amendment to a tax bill in 1999, only to be vetoed with the overall bill. Last year, there was another unsuccessful attempt to pass this important legislation spearheaded by then Senators Abraham and Moynihan together with their colleagues Fitzgerald and Schumer. Representatives of the Chicago JCRC, while meeting with Senator Fitzgerald during the 2001 JCPA Plenum, urged the Senator to reintroduce this legislation, which he has now done with the group of Senators listed above. The bill also restates existing law which excludes restitution payments from the computation of assets or income for federal or federally assisted means-tested programs.

Attached are talking points developed last year by the JCPA and the Conference on Jewish Material Claims Against Germany which we hope will help you explain this issue to your legislators.

NOTE: Several states have passed laws to exempt restitution payments from state taxation and, in some instances, from those settlements being used in computing eligibility for means-tested benefits. If your state has not passed such legislation, please contact the JCPA for additional information.

Holocaust Assets Restitution and Compensation Payments Federal Tax Exemption Legislation

Talking Points Developed By the Jewish Council for Public Affairs

and the Conference on Jewish Material Claims Against Germany

There is a pressing need for comprehensive, federal tax exemption legislation. Within the next year, Holocaust survivors and/or their heirs will likely begin receiving payments from various compensation and restitution settlements, such as those pertaining to Swiss banks, slave and forced labor, and unpaid insurance policies. Given the advanced age of most Holocaust survivors, it is imperative that the tax status of these payments be clarified in a speedy and comprehensive fashion. Broad federal tax exemption legislation will provide certainty for elderly Holocaust survivors, thereby sparing them from having to navigate complex legal and bureaucratic processes.
As survivor representatives and others have continuously emphasized, the issue of compensation and restitution to Holocaust survivors is a moral matter. Holocaust-related payments represent recognition of horrific wrongs committed against innocent people on a scale and in a manner unprecedented in history. They provide, at best, a small measure of moral justice for aging individuals who have endured unimaginable suffering in their lifetimes. Due to the unique circumstances surrounding these compensation efforts, it would be appropriate to enact clear and comprehensive tax exemption legislation that will apply to any and all Holocaust-related payments.
Passage of comprehensive tax-exemption legislation is in line with the American government’s long history of recognizing the need for special treatment of Holocaust-related payments:

The importance of tax exemption for restitution of assets lost during World War II was recognized by the U.S. government as early as 1947, with implementation of Article 91 of U.S. Military Law No. 59. This provision, administered by the temporary martial government that existed in Germany immediately after World War II, mandated that restitution made in connection with property confiscated from victims during the war be exempt from taxes and other public levies;

The U.S. Senate has ratified three treaties between the United States and Germany to exempt from income taxation German compensation payments made to Holocaust victims residing in the United States, because of such payments’ " penitent purpose and restitutionary character." (Grunfeder v. Heckler, 748 F.2d 503, 505 (9^th Cir., 1984). These treaties apply only to payments from the German government. Restitution efforts now underway will yield payments from other foreign governments and private corporations, thereby necessitating the passage of broader, more comprehensive legislation; and,

In a 1984 decision by the 9^th Circuit federal Court of Appeals holding that German reparations payments should not be counted as income in determining eligibility for SSI benefits, the Court stated that its decision was "in harmony with Congress’ desire to provide some solace to the victims of one of human history’s terrible tragedies." Ten years later, in 1994, Congress passed the Nazi Persecution Victims Eligibility Act (P.L. 103-286), which mandates that payments made to victims of Nazi persecution be disregarded in determining eligibility for all federal or federally assisted need-based public benefits programs. It is important to note that the existence of this federal law does not negate the need for states to enact their own legislation mandating that Holocaust compensation and restitution payments be disregarded when determining eligibility for state and local means-tested public benefits programs.

Despite the extensive media coverage of the large sums involved in Holocaust compensation and restitution settlements, in most cases individual survivors will receive a relatively small amount of money. For example, with respect to the DM10 billion (approximately $5.2 billion) slave labor settlement, about $4 billion will be allocated for individual compensation payments; that amount will be split among as many as 1.2 million forced laborers and an estimated 240,000 slave laborers worldwide, resulting in relatively modest individual payments.
Several states have enacted legislation specifically excluding Holocaust-related payments from taxation, including California, New York, Pennsylvania, Minnesota, Massachusetts, New Jersey, Illinois, Arizona, Iowa, Maryland, Michigan, Missouri, Connecticut, Indiana, and Virginia. This serves as an important precedent in this area. Given many states’ reliance on federal income tax rules to determine their own taxation schemes, a comprehensive federal tax exemption law would provide a helpful uniform national standard on this issue.

No amount of money can ever compensate Holocaust survivors for the horrors they endured. However, the tax-exemption legislation that has been introduced in both the House and the Senate would at least enable survivors to benefit fully from the token compensation and restitution payments they will receive in coming months and years.