with judgments, awards, and settlements with respect to workplace harassment Gross income shall not include any amount received in connection with a judgment or award in, or a settlement of— (1) a claim related to workplace harassment, including sexual harassment or other unlawful discrimination, or (2) any other claim of unlawful discrimination (as defined by section 62(e)). The preceding sentence shall not include any employment discrimination compensation to which section 1302 applies. . (2) 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 139G the following new item: Sec. 139H. Amounts received in connection with judgments, awards, or settlements with respect to workplace harassment. . (3) Effective date The amendments made by this subsection shall apply to amounts received in taxable years beginning after the date of the enactment of this Act. 3. Limitation on tax based on income averaging for compensation received on account of certain unlawful employment discrimination (a) In general Part I of subchapter Q of chapter 1 of the Internal Revenue Code of 1986 (relating to income averaging) is amended by adding at the end the following new section: 1302. Income from compensation received on account of certain unlawful employment discrimination (a) General rule In the case of any employment discrimination compensation received during any taxable year, the tax imposed by this chapter for such taxable year with respect to such compensation shall not exceed the sum of— (1) the tax which would be so imposed if— (A) no amount of such compensation were included in gross income for such year, and (B) no deduction were allowed for such year for expenses otherwise allowable as a deduction to the taxpayer for such year in connection with making or prosecuting any claim of unlawful employment discrimination by or on behalf of the taxpayer, plus (2) the product of— (A) the combined number of years in the backpay period