Are VCF Awards Tax Free?
Awards from the September 11th Victim Compensation Fund (VCF) are often substantial, with many people’s expenses, wage loss, and pain and suffering damages ranging well over a million dollars.
One of the questions we hear most often from our clients when they obtain a VCF award is: “Do I have to pay taxes on this?” The short answer to the question is: No, you don’t have to pay taxes on your VCF award. Read on for more information about how VCF awards came to be tax-free.
For answers to your questions about the VCF and your eligibility to obtain compensation through the program, let one of our experienced 9/11 benefits lawyers provide you with a free case evaluation.
About Hansen & Rosasco’s 9/11 Benefits Law Firm
The 9/11 benefits attorneys at Hansen & Rosasco help individuals who were impacted by the terrorist attack sites on September 11, 2001, obtain medical care, health monitoring, and compensation available through two federal programs: The World Trade Center (WTC) Health Program and the VCF.
Our results include the following lump-sum, tax-free awards paid to our clients:
- $3.4 million in wage loss and pain and suffering damages for a Wall Street executive who became completely disabled by 9/11-related metastatic breast cancer.
- $3.2 million for an NYPD officer who suffered colorectal cancer from his exposure to the toxic dust plume at the World Trade Center.
- $2.1 million for the family members of a counter-terrorism HAZMAT officer who died from 9/11-related metastatic bladder cancer.
- $1.1 million for a Battery Park resident who lived in the Ground Zero impact area below Canal Street who endured a double mastectomy for breast cancer and also suffered from lymphedema because of toxic exposure at her residence on September 11, 2001, and in the months that followed.
- $872,000 for a student at New York University who suffered rectal cancer due to 9/11-related toxic exposure while attending school in the impacted area.
- $1.3 million awarded to the family of a concrete worker who worked for Tully Construction at Ground Zero.
About VCF Awards
The September 11th Victims’ Compensation Fund (VCF) was initially formed by Congress shortly after the 9/11 terrorist attacks to provide compensation for any individual or personal representative of a deceased individual who suffered physical harm or was killed by the attacks in Lower Manhattan, at the Pentagon, and at the site of the downed plane in Shanksville, PA or during the debris removal and cleanup at those sites in the months that followed. The program initially ran until 2004.
January 2011 saw a revival of the VCF and the creation of the WTC Health Program through the passage of the James Zadroga 9/11 Health and Compensation Act of 2011. The program was reauthorized in 2015 and the funding allocated to the VCF was increased to accommodate a growing number of claims by individuals who had suffered the exposure and now—following several years’ latency—were being diagnosed with cancer and other medical conditions related to that exposure.
In 2019, the program was reauthorized again, this time until 2090, and provided funding as needed to adequately compensate all claims.
How VCF Claims Are Filed
Individuals wishing to obtain compensation through the VCF must:
- Register with the VCF by your applicable registration deadline. Registration is not the same as filing a claim, but is necessary to reserve your right to file a claim. Individuals (or their personal representatives in the case of wrongful death claims) who either had a loved one pass away or a medical condition certified by the WTC Health Program before July 29, 2019, must register with the VCF by July 29, 2021. For all other claimants, the deadline for registering is within two years of the latest date of death or the date listed on the WTC Health Program certification of your condition.
- Have your condition certified by the WTC Health Program through one of its designated facilities in the New York City metropolitan area or throughout the continental U.S. through a National Network Provider. Note: If a WTC-affiliated physician cannot examine you, ask your attorney for more information about the private physician process for having your 9/11-related conditions considered for funding.
- File your claim with all supporting documents any time before October 1, 2090.
How Compensation Is Received
Once you file your claim, it will receive a preliminary review to ensure that you have provided all of the information necessary to evaluate the claim. If you have not, then the VCF will send you a letter informing you that you are missing information and that your claim will be placed in inactive status until you submit the needed information.
At that point, consideration of your claim will resume. If you fail to submit the necessary documentation within 60 days of receiving the missing information notification, then your claim will be denied and must be amended to be reconsidered.
Following the preliminary review, a substantive review will take place to ensure that you are eligible for compensation based on the location of your exposure, the amount of your exposure, and the presence of a related health condition. The VCF generally reviews claims on a first-in, first-out basis, though priority is sometimes given to particularly urgent cases. The average time between submission of the claim and a decision on award is currently slightly over a year, according to the VCF.
Federal Exemption of VCF Awards from Taxable Income
Once you receive your award and pay your 9/11-related expenses and attorney fees, it is time to consider the impacts that the receipt of this money will have on your tax burden. Fortunately, Congress began considering these implications immediately, and has provided a good deal of guidance on the matter. Provisions in the initial legislation that created the VCF in October 2001, exempted VCF payments from federal income taxation.
The legislation also provided:
- Disability payments to individuals for injuries that were incurred from a terrorist attack (including 9/11 as well as the Oklahoma City bombing and other terrorist actions) are not taxable. This includes payments received through Social Security Disability Insurance benefits, the VCF, Workers’ Compensation, and other disability programs that provide wage loss compensation after injury or illness.
- If an individual dies from injuries or illness that resulted from a terrorist attack, including those who have died because of various types of cancer caused by exposure to the toxic dust at the 9/11 terrorist attack sites, his or her federal income tax liabilities are forgiven.
Unfortunately, the Internal Revenue Service (IRS) neglected to ensure that the general public knew about the tax relief provided to the victims of the September 11th terrorist attacks for many years, resulting in many affected individuals missing out on tax relief that included exemptions for payments made from the VCF and other disability benefits programs as well as a $10,000 credit or three years of taxes if an individual died from physical harm incurred by toxic exposure on September 11th. In 2014, the IRS updated its information to reflect the tax relief available to victims and how they can obtain it.
State Positions on VCF Awards and Taxes
The compensation received through the VCF for your 9/11-related illness is also generally tax-free at the state level. Here are some of the provisions for tax relief in the states that had the most individuals physically harmed by the terrorist attack on the World Trade Center in Lower Manhattan.
- New York. New York State forgives the tax liabilities of individuals who died from physical harm suffered on September 11, 2001. To obtain this tax relief, you must file the appropriate form, along with a copy of the victim’s death certificate and proof that the victim died from a 9/11-related injury or illness. The statute of limitations for obtaining a credit or refund of overpayment of income tax is the later of three years from the date the return was filed or the due date of the return or two years from the date the tax was paid.
- New Jersey. New Jersey also exempts compensation from a 9/11-related injury or illness from taxation and removes the tax burden for deceased individuals for the year in which the death occurred as well as all prior years beginning with the year in which the injury or illness occurred. The statute of limitations for seeking a credit for an overpayment of tax is within four years of the taxable year in which the taxpayer died.
- Pennsylvania. Pennsylvania exempts all manner of payments made in compensation for injuries and payments resulting from disabilities because of an act passed by any government, provided those payments are not made by an employer as regular wages.
To Receive an Award, You Must File a Claim. We Can Help.
It is extraordinarily helpful for the victims of the September 11th attacks—many of whom are just now being diagnosed with 9/11-related cancers after many years of latency that often occur between exposure and diagnosis, and many others who continue to die each year from 9/11-related illnesses—to receive compensation for their losses and quality-of-life impacts without fear of a large tax burden. However, to obtain an award by lump sum or periodic payments, you must first file a claim for VCF benefits.
9/11 benefits provided by the VCF are not only available to police officers and first responders, but to anyone who was in the proximity of the attack on September 11, 2001, or participated in the cleanup efforts or lived, worked, or attended school in the impacted area (south of Canal Street or anywhere the debris was handled) for several months following the attack.
The 9/11 benefits attorneys from Hansen & Rosasco have been helping the downtown NYC workers, residents, and students as well as the responders, and cleanup workers impacted by toxic exposure from the WTC dust that hung over lower Manhattan for almost a year to obtain the compensation they deserve since the earliest days of VCF progra,. We are very familiar with the process of pursuing this compensation as well as the type and amount of documentation that claimants need to file a claim.
We provide these services to our clients:
- A free case evaluation that allows them time with an attorney to obtain answers to their questions about obtaining compensation through the VCF and to learn more about the firm and the services it can provide.
- A careful review of their cases to determine if they are eligible to seek compensation for their injury or illness from the VCF, as well as guidance regarding other benefit programs that they may be eligible to participate in, including the WTC Health Program, the Social Security Disability Insurance program, and various state workers’ compensation programs.
- Ensuring they are aware of the deadlines involved in registering with the VCF and assistance in preserving their right to file a claim by meeting those deadlines.
- Making the VCF registration, the process of having their 9/11-related medical condition certified by the WTC Health Program, and the filing of their VCF claim, including ensuring that their claim is complete before it is submitted for consideration.
Handling all disputes or appeals of award amounts or decisions, as well as assistance with filing amended claims after the claims have been denied due to missing information.
- Representation and advice as to how participation in one benefit program can impact their ability to obtain benefits for other programs.
- Client-friendly contingent fee of 10% with zeroother costs. This means that we will not charge our clients for our services unless we help them to a successful outcome in their cases.