Amends the Internal Revenue Code, with respect to the tax exemption for structured settlement factoring transactions (i.e., transfers of the right to receive periodic payments under a settlement of a legal claim for damages in exchange for a lump sum payment) to require that court orders approving such transfers include additional requirements, including that: (1) the annual discount rate of the consideration for a transfer does not exceed the prime interest rate plus 5%; (2) the aggregate amount of charges, fees, and other expenses payable by the payee of the lump sum payment do not exceed 2% of the value of the consideration to the payee; (3) the payee is not liable for any penalty or forfeiture if the transfer does not satisfy the additional requirements imposed by this Act; (4) the transferee (the entity receiving the right to the periodic payments) has given written notice of its name, address, and taxpayer identification number to the annuity issuer and the structured settlement obligor and has filed a copy of such notice with the state court or other authority issuing the order approving the transfer; (5) the transfer is fair and reasonable; and (6) the transferee makes certain disclosures to the payee.
[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3897 Introduced in House (IH)]
113th CONGRESS
2d Session
H. R. 3897
To amend the Internal Revenue Code of 1986 to strengthen the rules for
approved structured settlement factoring transactions.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 16, 2014
Mr. Cartwright (for himself, Mr. Grijalva, Mr. Higgins, Mr. Honda, Mr.
Lewis, Ms. Lee of California, and Ms. Schakowsky) 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 strengthen the rules for
approved structured settlement factoring transactions.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. MODIFICATION OF QUALIFIED ORDER REQUIREMENTS FOR APPROVED
TRANSACTIONS.
(a) In General.--Subparagraph (A) of section 5891(b)(2) of the
Internal Revenue Code of 1986 is amended by striking ``and'' at the end
of clause (i) and by adding at the end the following new clause:
``(iii) satisfies the requirements of
paragraph (5), and''.
(b) Transaction Requirements.--Subsection (b) of section 5891 of
such Code is amended by redesignating paragraph (5) as paragraph (6)
and by inserting after paragraph (4) the following new paragraph:
``(5) Transaction requirements.--
``(A) In general.--A transfer of structured
settlement payment rights shall be treated as
satisfying the requirements of this paragraph only if
the transfer meets the following requirements:
``(i) The annual discount rate of the
consideration for the transfer, determined by
taking into account charges, fees, and other
expenses, does not exceed the prime rate plus 5
percentage points.
``(ii) The aggregate amount of charges,
fees, and other expenses payable by the payee
do not exceed 2 percent of the value of the
consideration to the payee (net of such
charges, fees, and other expenses).
``(iii) The payee is not liable for any
penalty, and will not forfeit any amounts
already paid or incurred, if the transfer does
not satisfy the requirements of this paragraph.
``(iv) The transferee has given written
notice of the transferee's name, address, and
taxpayer identification number to the annuity
issuer and the structured settlement obligor
and has filed a copy of such notice with the
State court or responsible administrative
authority issuing the qualified order.
``(v) The transfer is fair and reasonable.
``(vi) Not later than 5 days, and not
earlier than 15 days, before the date on which
the payee first incurs any obligations with
respect to the transfer, the transferee
provides to the payee a disclosure statement
which sets forth in a clear and conspicuous
manner the following:
``(I) The remaining amounts payable
and payment dates under the structured
settlement.
``(II) The aggregate of such
amounts.
``(III) The discounted present
value of the structured settlement
payment rights determined by using a
discount rate equal to the applicable
Federal rate, compounded annually.
``(IV) A statement of the total
consideration made in exchange for the
structured settlement payment rights.
``(V) An itemized list of all
charges, fees, and other expenses
payable by the payee, or deductible
from the gross amount otherwise payable
to the payee, with respect to the
transfer.
``(VI) The value of consideration
to the payee net of the charges, fees,
and other expenses described in
subclause (V).
``(VII) The quotient (expressed as
a percentage) of the amount of net
consideration described in subclause
(VI) divided by the discounted present
value of the structured settlement
payment rights determined under
subclause (III).
``(VIII) The annual discount rate
of the consideration for the transfer
determined by taking into account
charges, fees, and other expenses.
``(IX) The amount of any penalties
(including any liquidated damages)
payable by the payee in the case of any
breach of the transfer agreement by the
payee.
``(B) Prime rate.--For purposes of this paragraph,
the term `prime rate' means the bank prime rate for the
first day of the month in which the transfer agreement
is executed, as published in the Federal Reserve
Statistical Release on selected interest rates (daily
or weekly), and commonly referred to as the H.15
release (or any successor publication).''.
(c) Effective Date.--The amendments made by this section shall
apply to structured settlement factoring transactions (as defined in
section 5891 of such Code) entered into later than 180 days after the
date of the enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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