[1] Employment cases are an exception to this Supreme Court ruling because of the Civil Rights Tax Relief in the American Jobs Creation Act of 2004.

The Internal Revenue Service (IRS) contended that the entire amount was income to Banks, a position upheld by the United States Tax Court.

The United States Court of Appeals for the Sixth Circuit ruled in favor of Banks, holding the lawyer's share could be excluded from the taxpayer's gross income.

Under this theory, Banks and his attorney were in effect partners in a joint venture who shared a recovery, and who should each be taxed only on his separate part.

After these cases arose, the Internal Revenue Code Section 62(a)(20),[9] enacted as part of the American Jobs Creation Act of 2004, expressly permits a taxpayer to subtract from his or her gross income, in arriving at adjusted gross income, the "attorneys fees and court costs paid by, or on behalf of, the taxpayer in connection with any action involving a claim of unlawful discrimination" as defined by the Act.

Commissioner v. Banks is still precedent for those contingent fee arrangements not eligible for an above the line deduction, which include claims for defamation, invasion of privacy, and tortious interference with contract.