The IRS and the Timothy Cole Act

Yesterday, the posthumous pardon of Timothy Cole, the namesake for the Texas Timothy Cole Act, was finally honored by Governor Rick Perry. Cole was cleared of his wrongful conviction in the sexual assault of a Texas Tech student in 2008, nine years after Cole had died in prison after asthma induced cardiac arrest.

The Timothy Cole Act which became effective September 1, 2009 increased compensation for the wrongfully convicted to $80,000 per year spent in prison. The goal of the act was to provide exonerees with a financial wholeness to compensate for the injustice committed against them. However, now the Internal Revenue Service is demanding their cut.
According to a report published in the Dallas Morning News on February 23, 2010, the IRS has deemed such compensation as now provided by the state is taxable since it is not compensation related to “pain and suffering in connection with a physical injury or sickness.”
State Representative Rafael Anchia of Dallas, a co-sponsor of the Timothy Cole Act, is asking the U.S. Congress to revise federal tax codes to exempt the taxation of compensation relating to wrongful imprisonment.
For the Cole family, who is expected to receive almost $1 million in compensation from the state of Texas, the taxation of such funds would only be adding insult to injury.
To read the entire Dallas Morning News article click here.