An act relating to excluding income from damages related to employment-related lawsuits from income tax

This bill would allow individuals in Vermont to exclude certain damages from their state income tax when they win an employment-related lawsuit against their employer. Specifically, it removes from taxable income amounts awarded for emotional distress, mental anguish, lost wages, or lost benefits, but not punitive damages. The change applies to both court-awarded damages and settlement agreements reached in such cases. This provision would take effect retroactively for the 2024 tax year and all subsequent years.