[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5421 Introduced in House (IH)]

  2d Session
                                H. R. 5421

 To amend the Internal Revenue Code of 1986 to impose an excise tax on 
    persons who acquire structured settlement payments in factoring 
                 transactions, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 6, 2000

  Mr. Shaw (for himself and Mr. Stark) introduced the following bill; 
         which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to impose an excise tax on 
    persons who acquire structured settlement payments in factoring 
                 transactions, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Structured Settlement Protection 
Act''.

SEC. 2. IMPOSITION OF EXCISE TAX ON PERSONS WHO ACQUIRE STRUCTURED 
              SETTLEMENT PAYMENTS IN FACTORING TRANSACTIONS.

    (a) In General.--Subtitle E of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new chapter:

       ``CHAPTER 55--STRUCTURED SETTLEMENT FACTORING TRANSACTIONS

        ``Sec. 5891. Structured settlement factoring transactions.

``SEC. 5891. STRUCTURED SETTLEMENT FACTORING TRANSACTIONS.

    ``(a) Imposition of Tax.--There is hereby imposed on any person who 
acquires directly or indirectly structured settlement payment rights in 
a structured settlement factoring transaction a tax equal to 40 percent 
of the factoring discount as determined under subsection (c)(4) with 
respect to such factoring transaction.
    ``(b) Exception for Certain Approved Transactions.--
            ``(1) In general.--The tax under subsection (a) shall not 
        apply in the case of a structured settlement factoring 
        transaction in which the transfer of structured settlement 
        payment rights is approved in advance in a qualified order.
            ``(2) Qualified order.--For purposes of this section, the 
        term `qualified order' means a final order, judgment, or decree 
        which--
                    ``(A) finds that the transfer described in 
                paragraph (1)--
                            ``(i) does not contravene any Federal or 
                        State statute or the order of any court or 
                        responsible administrative authority, and
                            ``(ii) is in the best interest of the 
                        payee, taking into account the welfare and 
                        support of the payee's dependents, and
                    ``(B) is issued--
                            ``(i) under the authority of an applicable 
                        State statute by an applicable State court, or
                            ``(ii) by the responsible administrative 
                        authority (if any) which has exclusive 
                        jurisdiction over the underlying action or 
                        proceeding which was resolved by means of the 
                        structured settlement.
            ``(3) Applicable state statute.--For purposes of this 
        section, the term `applicable State statute' means a statute 
        providing for the entry of an order, judgment, or decree 
        described in paragraph (2)(A) which is enacted by--
                    ``(A) the State in which the payee of the 
                structured settlement is domiciled, or
                    ``(B) if there is no statute described in 
                subparagraph (A), the State in which either the party 
                to the structured settlement (including an assignee 
                under a qualified assignment under section 130) or the 
                person issuing the funding asset for the structured 
                settlement is domiciled or has its principal place of 
                business.
            ``(4) Applicable state court.--For purposes of this 
        section--
                    ``(A) In general.--The term `applicable State 
                court' means, with respect to any applicable State 
                statute, a court of the State which enacted such 
                statute.
                    ``(B) Special rule.--In the case of an applicable 
                State statute described in paragraph (3)(B), such term 
                also includes a court of the State in which the payee 
                of the structured settlement is domiciled.
            ``(5) Qualified order dispositive.--A qualified order shall 
        be treated as dispositive for purposes of the exception under 
        this subsection.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Structured settlement.--The term `structured 
        settlement' means an arrangement--
                    ``(A) which is established by--
                            ``(i) suit or agreement for the periodic 
                        payment of damages excludable from the gross 
                        income of the recipient under section 
                        104(a)(2), or
                            ``(ii) agreement for the periodic payment 
                        of compensation under any workers' compensation 
                        act excludable from the gross income of the 
                        recipient under section 104(a)(1), and
                    ``(B) under which the periodic payments are--
                            ``(i) of the character described in 
                        subparagraphs (A) and (B) of section 130(c)(2), 
                        and
                            ``(ii) payable by a person who is a party 
                        to the suit or agreement or to the workers' 
                        compensation claim or by a person who has 
                        assumed the liability for such periodic 
                        payments under a qualified assignment in 
                        accordance with section 130.
            ``(2) Structured settlement payment rights.--The term 
        `structured settlement payment rights' means rights to receive 
        payments under a structured settlement.
            ``(3) Structured settlement factoring transaction.--
                    ``(A) In general.--The term `structured settlement 
                factoring transaction' means a transfer of structured 
                settlement payment rights (including portions of 
                structured settlement payments) made for consideration 
                by means of sale, assignment, pledge, or other form of 
                encumbrance or alienation for consideration.
                    ``(B) Exception.--Such term shall not include--
                            ``(i) the creation or perfection of a 
                        security interest in structured settlement 
                        payment rights under a blanket security 
                        agreement entered into with an insured 
                        depository institution in the absence of any 
                        action to redirect the structured settlement 
                        payments to such institution (or agent or 
                        successor thereof) or otherwise to enforce such 
                        blanket security interest as against the 
                        structured settlement payment rights, or
                            ``(ii) a subsequent transfer of structured 
                        settlement payment rights acquired in a 
                        structured settlement factoring transaction.
            ``(4) Factoring discount.--The term `factoring discount' 
        means an amount equal to the excess of--
                    ``(A) the aggregate undiscounted amount of 
                structured settlement payments being acquired in the 
                structured settlement factoring transaction, over
                    ``(B) the total amount actually paid by the 
                acquirer to the person from whom such structured 
                settlement payments are acquired.
            ``(5) Responsible administrative authority.--The term 
        `responsible administrative authority' means the administrative 
        authority which had jurisdiction over the underlying action or 
        proceeding which was resolved by means of the structured 
        settlement.
            ``(6) State.--The term `State' includes any possession of 
        the United States.
    ``(d) Coordination With Other Provisions.--
            ``(1) In general.--If the applicable requirements of 
        sections 72, 104(a) (1) and (2), 130, and 461(h) were satisfied 
        at the time the structured settlement was entered into, the 
        subsequent occurrence of a structured settlement factoring 
        transaction shall not affect the application of the provisions 
        of such sections to the parties to the structured settlement 
        (including an assignee under a qualified assignment under 
        section 130) in any taxable year.
            ``(2) No withholding of tax.--The provisions of section 
        3405 regarding withholding of tax shall not apply to the person 
        making the payments in the event of a structured settlement 
        factoring transaction.''.
    (b) Clerical Amendment.--The table of chapters for subtitle E of 
such Code is amended by adding at the end the following new item:

                              ``Chapter 55. Structured settlement 
                                        factoring transactions.''.
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section (other 
        than the provisions of section 5891(d) of the Internal Revenue 
        Code of 1986, as added by this section) shall apply to 
        structured settlement factoring transactions (as defined in 
        section 5891(c) of such Code as adopted by this section) 
        entered into on or after the 30th day following the date of the 
        enactment of this Act.
            (2) Clarification of existing law.--Section 5891(d) of such 
        Code (as so added) shall apply to transactions entered into 
        before, on, or after such 30th day.
            (3) Transition rule.--In the case of a structured 
        settlement factoring transaction entered into during the period 
        beginning on the 30th day following the date of the enactment 
        of this Act and ending on July 1, 2002, no tax shall be imposed 
        under section 5891(a) of such Code if--
                    (A) the structured settlement payee is domiciled in 
                a State (or possession of the United States) which has 
                not enacted a statute providing that the structured 
                settlement factoring transaction is ineffective unless 
                the transaction has been approved by an order, 
                judgment, or decree of a court (or where applicable, a 
                responsible administrative authority) which finds that 
                such transaction--
                            (i) does not contravene any Federal or 
                        State statute or the order of any court (or 
                        responsible administrative authority), and
                            (ii) is in the best interest of the 
                        structured settlement payee or is appropriate 
                        in light of a hardship faced by the payee, and
                    (B) the person acquiring the structured settlement 
                payment rights discloses to the structured settlement 
                payee in advance of the structured settlement factoring 
                transaction the amounts and due dates of the payments 
                to be transferred, the aggregate amount to be 
                transferred, the consideration to be received by the 
                structured settlement payee for the transferred 
                payments, the discounted present value of the 
                transferred payments including the present value as 
                determined in the manner described in section 7520 of 
                such Code, and the expenses required under the terms of 
                the structured settlement factoring transaction to be 
                paid by the structured settlement payee or deducted 
                from the proceeds of such transaction.
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