-CITE-
    26 USC CHAPTER 55 - STRUCTURED SETTLEMENT FACTORING
           TRANSACTIONS                                    01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle E - Alcohol, Tobacco, and Certain Other Excise Taxes
    CHAPTER 55 - STRUCTURED SETTLEMENT FACTORING TRANSACTIONS

-HEAD-
         CHAPTER 55 - STRUCTURED SETTLEMENT FACTORING TRANSACTIONS     

-MISC1-
    Sec.                                                     
    5891.       Structured settlement factoring transactions.         

-End-



-CITE-
    26 USC Sec. 5891                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle E - Alcohol, Tobacco, and Certain Other Excise Taxes
    CHAPTER 55 - STRUCTURED SETTLEMENT FACTORING TRANSACTIONS

-HEAD-
    Sec. 5891. Structured settlement factoring transactions

-STATUTE-
    (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 law 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 the Commonwealth of Puerto Rico and
      any possession of the United States.
    (d) Coordination with other provisions
      (1) In general
        If the applicable requirements of sections 72, 104(a)(1),
      104(a)(2), 130, and 461(h) were satisfied at the time the
      structured settlement involving structured settlement payment
      rights 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.

-SOURCE-
    (Added Pub. L. 107-134, title I, Sec. 115(a), Jan. 23, 2002, 115
    Stat. 2436.)


-MISC1-
                              EFFECTIVE DATE                          
      Pub. L. 107-134, title I, Sec. 115(c), Jan. 23, 2002, 115 Stat.
    2438, provided that:
      "(1) In general. - The amendments made by this section [enacting
    this chapter] (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 so added)) entered into on or
    after the 30th day following the date of the enactment of this Act
    [Jan. 23, 2002].
      "(2) Clarification of existing law. - Section 5891(d) of such
    Code (as so added) shall apply to structured settlement factoring
    transactions (as defined in section 5891(c) of such Code (as so
    added)) 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."

-End-


-CITE-
    26 USC Subtitle F - Procedure and Administration            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle F - Procedure and Administration

-HEAD-
    Subtitle F - Procedure and Administration

-MISC1-
    Chapter                                                     Sec.(!1)
    61.     Information and returns                                 6001 
    62.     Time and place for paying tax                           6151
    63.     Assessment                                              6201
    64.     Collection                                              6301
    65.     Abatements, credits, and refunds                        6401
    66.     Limitations                                             6501
    67.     Interest                                                6601
    68.     Additions to the tax, additional amounts, and
             assessable penalties                                   6651
    69.     General provisions relating to stamps                   6801
    70.     Jeopardy, receiverships, etc.                           6851
    71.     Transferees and fiduciaries                             6901
    72.     Licensing and registration                              7001
    73.     Bonds                                                   7101
    74.     Closing agreements and compromises                      7121
    75.     Crimes, other offenses, and forfeitures                 7201
    76.     Judicial proceedings                                    7401
    77.     Miscellaneous provisions                                7501
    78.     Discovery of liability and enforcement of title         7601
    79.     Definitions                                             7701
    80.     General Rules                                           7801

                                AMENDMENTS                            
      1980 - Pub. L. 96-589, Sec. 6(g)(3)(E), Dec. 24, 1980, 94 Stat.
    3410, substituted "Jeopardy, receiverships, etc." for "Jeopardy,
    bankruptcy and receiverships" in item for chapter 70.

-FOOTNOTE-
    (!1) Section numbers editorially supplied.


-End-