Settlements for physical injury or illness are not taxable. A claim purely for mental anguish does NOT meet the physical injury or illness test and would therefore be taxable. However if the mental anguish portion is stated separately but was based upon a physical injury or illness, the courts have held that it is not taxable and is merely part of the physical injury payout.
Edit: Rape entails a physical injury component even if minimal compared to the mental anguish. I would argue that it would be a settlement for physical injury, not purely mental anguish. If you are in a position to negotiate a settlement on such a matter, I'd strongly suggest that your attorney insist on it being worded for the physical injury resulting from the attack. At that point the mental anguish component is ancillary to the physical injury component and is therefore not taxable. Also, avoid any punitive damage component if at all possible since punitive damages are fully taxable. A smart attorney would fold any "punitive" component into the basic physical injury award to avoid taxation on it.
I'm Catholic and I think this statement should not have been part of the law. I think if you're a true believer then you don't need legislation to know/remind you of God.
I agree with the lawsuit that these statements need to be removed from the law. However, the portion of the lawsuit seeking monetary damages for mental anguish is an illustration of how frivolous lawsuits have become. Additionally, calling those with beliefs fanatics, traitors or fools, may put off Christians who agree with Atheists about keeping Church and State separate.