To amend the Internal Revenue Code of 1986 to exclude certain severance payments from gross income for employees who are laid off.

May 9, 2003

Mr. SMITH of New Jersey (for himself, Mr. RENZI, and Mr. GARRETT of New Jersey) introduced the following bill; which was referred to the Committee on Ways and Means

To amend the Internal Revenue Code of 1986 to exclude certain severance payments from gross income for employees who are laid off.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Displaced Worker Assistance Act of 2003'.

SEC. 2. EXCLUSION FROM INCOME OF SEVERANCE PAYMENT AMOUNTS.

(a) IN GENERAL- Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to items specifically excluded from gross income) is amended by inserting after section 139 the following new section:

`SEC. 139A. SEVERANCE PAYMENTS.

`(a) IN GENERAL- In the case of an individual, gross income shall not include any qualified severance payment.

`(b) LIMITATIONS-

`(1) AMOUNT- The amount to which the exclusion under subsection (a) applies shall not exceed--

`(A) $15,000, with respect to any separation from employment, reduced by

`(B) the aggregate amount excluded from gross income under subsection (a) in prior taxable years.

`(2) YEARS TO WHICH EXCLUSION APPLIES- No qualified severance payment shall be excluded from gross income under subsection (a) unless such payment is received in the taxable year in which separation from employment occurs or in one of the two succeeding taxable years.

`(c) QUALIFIED SEVERANCE PAYMENT- For purposes of this section, the term `qualified severance payment' means any payment received by an individual if--

`(1) such payment was paid by such individual's employer on account of such individual's separation from employment, and

`(2) such individual received a written notice from such employer indicating that such payment is a severance payment.'.

(b) CLERICAL AMENDMENT- The table of sections for part III of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 139 the following new item:

`Sec. 139A. Severance payments.'.

(c) EFFECTIVE DATE- The amendments made by this section shall apply to taxable years beginning after December 31, 2002.

END