I have heard that unauthorized employment is forgiven in marriage-based AOS cases. Where is this in the INA law?

This is correct.- where the individual is Adjusting Status based on marriage to a U.S. citizen, unauthorized employment is essentially forgiven. As for the law - it's a bit convoluted; rather than a specific law saying that it's OK there's just an exception for it written into the law saying that generally it isn't OK.

The concept of Adjusting Status to Permanent Residence is contained in Section 245(a) of the Immigration and Nationality Act (INA)

INA Section 245(c)(2) provides among other things that someone who has engaged in unauthorized employment is PROHIBITED from Adjusting Status in the U.S. under INA Section 245(a), EXCEPT for Immediate Relatives as defined by INA Section 201(b) and certain Special Immigrants.

INA Section 201(b)(2)(A)(i) defines Immediate Relatives as the spouse, children, or parents of a U.S. citizen (I'm oversimplifying a bit here).

Now, the fact that it's forgiven for Adjustment purposes doesn't mean that it's OK to work without authorization - it doesn't forgive the employer the normal penalties for employing someone without authorization if they get caught, or keep you out of trouble if caught before the Adjustment case is adjudicated. But, it should NOT be lied about on the forms or your taxes - or in the interview - if you have worked without authorization.

Seek a lawyer's counsel with your application concerning how to deal with this and other issues.