26 U.S.C. § 104: Compensation for injuries or sickness

amounts received under workmen’s compensation acts as compensation for personal injuries or sickness; the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness; amounts received through accident or health insurance (or through an arrangement having the effect of accident or health insurance) for personal injuries or sickness (other than amounts received by an employee, to the extent such amounts (A) are attributable to contributions by the employer which were not includible in the gross income of the employee, or (B) are paid by the employer); amounts received as a pension, annuity, or similar allowance for personal injuries or sickness resulting from active service in the armed forces of any country or in the Coast and Geodetic Survey or the Public Health Service, or as a disability annuity payable under the provisions of section 808 of the Foreign Service Act of 1980; amounts received by an individual as disability income attributable to injuries incurred as a direct result of a terroristic or military action (as defined in section 692(c)(2)); and section 1201 of the Omnibus Crime Control and Safe Streets Act of 1968 ( 42 U.S.C. 3796 ); 1 or 1 See References in Text note below. a program established under the laws of any State which provides monetary compensation for surviving dependents of a public safety officer who has died as the direct and proximate result of a personal injury sustained in the line of duty, Subsection (a)(4) shall not apply in the case of any individual who is not described in paragraph (2). on or before September 24, 1975 , he was entitled to receive any amount described in subsection (a)(4), on September 24, 1975 , he was a member of any organization (or reserve component thereof) referred to in subsection (a)(4) or under a binding written commitment to become such a member, he receives an amount described in subsection (a)(4) by reason of a combat-related injury, or on application therefor, he would be entitled to receive disability compensation from the Department of Veterans Affairs. as a direct result of armed conflict, while engaged in extrahazardous service, or under conditions simulating war; or which is caused by an instrumentality of war. In the case of any individual described in paragraph (2), the amounts excludable under subsection (a)(4) for any period with respect to any individual shall not be less than the maximum amount which such individual, on application therefor, would be entitled to receive as disability compensation from the Veterans’ Administration. which is a wrongful death action, and with respect to which applicable State law (as in effect on September 13, 1995 and without regard to any modification after such date) provides, or has been construed to provide by a court of competent jurisdiction pursuant to a decision issued on or before September 13, 1995 , that only punitive damages may be awarded in such an action. For exclusion from employee’s gross income of employer contributions to accident and health plans, see section 106. For exclusion of part of disability retirement pay from the application of subsection (a)(4) of this section, see section 1403 of title 10 , United States Code (relating to career compensation laws). Except as provided in paragraph (2), the amendments made by this section [amending this section] shall apply to amounts received after the date of the enactment of this Act [ Aug. 20, 1996 ], in taxable years ending after such date. The amendments made by this section shall not apply to any amount received under a written binding agreement, court decree, or mediation award in effect on (or issued on or before) September 13, 1995 .” Except as provided in paragraph (2), the amendment made by subsection (a) [amending this section] shall apply to amounts received after July 10, 1989 , in taxable years ending after such date. under any written binding agreement, court decree, or mediation award in effect on (or issued on or before) July 10, 1989 , or pursuant to any suit filed on or before July 10, 1989 .”