I do want to stress that the Task Force did an admirable job and should be commended for its work.
Who Would be Compensated?
Living victims, generally. However, it appears from what has been reported that the task force recommended “money go to verified, living victims, including those who are alive now but may die before the lawmakers approve any compensation.”
Comment: This is fine so long as the victims are verified prior to their death and after the legislation has passed. Unfortunately, it is my understanding that the task force is recommending compensation for verified victims who die prior to the enactment of legislation.
I understand the desire to provide compensation to verified victims who die prior to the enactment of legislation. However, let’s assume for example that the legislature doesn’t pass a bill for 5 years.
In that scenario, if someone was verified today and then died this year, the legislature would be providing compensation to the descendants when it passes a bill.
Technically, if the legislature passes a bill and, after that, a victim is verified and then dies before receiving compensation, the money would be going to the descendants.
However, at least in that scenario, the legislature’s action would be designed to compensate the victims not the descendants. When the legislature passed the bill, they would in effect be saying “give the money to the victims who are living as of the effective date of the bill.”
How Much Money Would the Victims Receive?
Comment: They went with a higher amount than what was expected. There was some disagreement when they voted. I had recommended $20,000, but I do believe victims should receive more than $20,000, but not from the General Fund.
It would have been beneficial if the committee identified multiple means of compensation. When all is said and done, my recommendations may even exceed $50,000.
What Did the Task Force Estimate are the Number of Living Victims?
The Task Force is using the 1,500-2,000 estimate, but this is a very questionable number. The data originally presented to the Task Force provided an estimate of 2,944 living victims. The lower range may be more accurate, but the original estimate shouldn’t be ignored absent some detailed explanation by the state why the higher number isn’t appropriate.
Using the lower numbers makes compensation more feasible to become law, but it also may make it problematic in practice. Having said this, it is very likely that regardless of the number of living victims, many won’t come forward due to many reasons, from privacy concerns to a feeling of shame.
What is the Statute of Limitations?
Victims would have three years to request compensation. From what I could hear (it wasn’t easy to hear what was being said), the three years would start from the law’s effective date.
Comment: I had recommended a five year statute of limitations from the effective date. This would give the victims more time.
Three years is probably too little time. The state won’t be sending out letters directly to victims. Instead, there would be a massive education campaign to let victims know that compensation exists. This will take time, plus I do think there will be trepidation from victims to come forward.
Would the $50,000 be Taxed?
The Task Force wanted to avoid state and federal taxation of the $50,000. This certainly can be done on the state level. The legislature can just pass a law.
However, the federal taxation issue is more complicated. The Task Force is trying to somehow establish that the money would be excluded from gross income under IRC 104(a)(2):
Except in the case of amounts attributable to (and not in excess of)
deductions allowed under section 213 (relating to medical, etc., expenses)
for any prior taxable year, gross income does not include –
(2) the amount of any damages (other than punitive damages) received
(whether by suit or agreement and whether as lump sums or as periodic
payments) on account of personal physical injuries or physical sickness;
The problem is that this section deals with “suits or agreements.” It likely wouldn’t cover a compensation program established by a state legislature. See e.g. these IRS proposed regulations and this brief article.
The Task Force recommended a public education campaign about the history of the sterilization program. There also was a recommendation about mental health benefits.