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The Dark Truth Behind California's Strangest Tax Exemption

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One of the very few interesting things about doing your taxes is reading about the odd exemptions. This year I learned that the government can't claim any money I should get from the Ottoman Empire. It seemed funny. It's not.

There are lots of weird exemptions you can get from California; for instance, the state does not require people to pay income tax on any money they get as a reward from a crime hotline, so long as the reward is offered by a government agency or a nonprofit charitable organization recognized by the state. You can also keep any money you get as compensation for false imprisonment. But there was one exemption that really stands out — California residents are exempt from tax on any "Ottoman Turkish Empire Settlement Payment." It seems comically antiquated... until you learn the dark story behind this odd bit of tax code.


The Ottoman Empire was dissolved at the beginning of the 20th century, a time of violence and displacement. The Empire was under pressure from without, as foreign countries annexed pieces of land, and from within, as populations began to assert their independence from an old-fashioned regime. The rise of nationalism, and the perceived threat of outsiders, caused a genocide between 1915 and 1923 that still has consequences. The Ottoman Empire carried out a systematic deportation and genocide of Greeks, Assyrians, and Armenians. Exact numbers are impossible to find, but well over a half million of each population died, and some estimate that 1,500,000 Armenians were killed.

This tax exemption may seem like a relic, but it's not — there are still settlements being paid to the descendants of those who died. In 2004, a life insurance company paid $20 million dollars to settle a lawsuit brought by surviving families of those Armenians who took out life insurance policies and were subsequently killed during the genocide. The payment was paid partly to Armenian charitable organizations, and partly to heirs, with the average settlement being 10,000 to 15,000 dollars.


The California tax code, then, states that the survivors and heirs do not have to pay tax on the money they receive as settlement for the historical horror. It does not use the word "genocide, " but states that there is an exemption for "settlement payments by individuals persecuted by the regime that was in control of the Ottoman Turkish Empire from 1915 until 1923." Still, on a dry, financial document, generally used by private individuals, we see — often without realizing it — one of the consequences of the actions of an empire that dissolved a century ago.

[Via California Income Tax Manual, International Association of Genocide Scholars, $20M Settlement For Armenians, U.S. Should Call Armenian Genocide By Its Name]

Image: Geographicus Rare Antique Maps