State Sen. Paul Sarlo

A committee of the New Jersey Legislature on Thursday recommended passage of a bill that, mirroring federal law, would allow successful plaintiffs in fee-shifting job discrimination actions to claim a gross income tax deduction for counsel fees and costs.

The Senate Budget and Appropriations Committee voted 11-0 to pass the bill, S-784. It now goes to the full Senate for consideration, and would need to pass through the Assembly and be signed by Gov. Philip Murphy to become law. The bill, for which there currently is no companion in the Assembly, is sponsored by the committee chairman, Sen. Paul Sarlo, D-Bergen.

A hearing on the bill yielded no opposition or discussion. Sarlo did not immediately respond to a request for comment afterward.

The bill would provide a “victim of certain unlawful discrimination or unlawful retaliation with a gross income tax exclusion for attorney's fees and costs received in connection with claims or actions for that discrimination or retaliation,” according the accompanying statement.

It was introduced in response to the 2004 federal Civil Rights Tax Relief Act, which was part of the American Jobs Creation Act. The CRTRA was designed to eliminate the double taxation of attorney fees and costs at the federal level to both the attorney who is ultimately paid the fees and to the litigant who is awarded the fees. The act accomplished that goal by allowing the litigant to take a deduction for the recovery of or payment of fees and costs in connection with any action or claim of unlawful discrimination or retaliation.

However, New Jersey's tax laws were not amended when Congress enacted the CRTRA that year, according to the measure.

As a result, the statement said, counsel fees and costs incurred in connection with such claims are still taxable to both firm and client at the state level, even though the client never actually receives the fees.

Under the bill, “attorney's fees” and “costs” would be liberally construed to include all compensation for expenditures for the victim, including counsel fees, paralegal fees, court costs, litigation expenses and expenses for experts and consultants.

Prior versions of the bill didn't advance to full votes, according to online legislative records.