Structured Settlement Protection Act

Summary: Structured Settlement Protection Act - Amends the Internal Revenue Code to: (1) impose an excise tax on persons acquiring structured settlement payments in factoring transactions; and (2) set forth related reporting requirements.

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

    (a) 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 of indirectly structured settlement payment rights in 
a structured settlement factoring transaction a tax equal to 50 percent 
of the factoring discount as determined under subsection (c)(4) with 
respect to such factoring transaction.
    ``(b) Exception for Court-Approved Hardship.--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--
            ``(1) otherwise permissible under applicable law, and
            ``(2) undertaken pursuant to the order of the relevant 
        court or administrative authority finding that the 
        extraordinary, unanticipated, and imminent needs of the 
        structured settlement recipient or his or her spouse or 
        dependents render such a transfer appropriate.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Structured settlement.--The term `structured 
        settlement' means an arrangement--
                    ``(A) 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 that is excludable from the gross income of 
                        the recipient under section 104(a)(1), and
                    ``(B) where 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.--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.
            ``(4) Factoring discount.--The term `factoring discount' 
        means amount equal to the excess of (i) the aggregate 
        undiscounted amount of structured settlement payments being 
        acquired in the structured settlement factoring transaction, 
        over (ii) the total amount actually paid by the acquirer to the 
        person from whom such structured settlement payments are 
        acquired.
            ``(5) Relevant court or administrative authority.--The term 
        `relevant court or administrative authority' means--
                    ``(A) the court (or where applicable, the 
                administrative authority) which had jurisdiction over 
                the underlying action or proceeding that was resolved 
                by means of the structured settlement, or
                    ``(B) in the event that no action or proceeding was 
                brought, a court (or where applicable, the 
                administrative authority) which--
                            ``(i) would have had jurisdiction over the 
                        claim that is the subject of the structured 
                        settlement, or
                            ``(ii) has jurisdiction by reason of the 
                        residence of the structured settlement 
                        recipient.
    ``(d) Coordination With Other Provisions.--
            ``(1) In general.--In any case where the applicable 
        requirements of sections 72, 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) Regulations.--The Secretary is authorized to 
        prescribe such regulations as may be necessary to clarify the 
        treatment in the event of a structured settlement factoring 
        transaction of amounts received by the structured settlement 
        recipient.''
    (b) Information Reporting.--Subpart B of part III of subchapter A 
of chapter 61 of such Code is amended by adding at the end the 
following new section:

``SEC. 6050T. REPORTING REQUIREMENTS REGARDING STRUCTURED SETTLEMENT 
              FACTORING TRANSACTIONS.

    ``(a) In General.--In the case of a transfer of structured 
settlement payment rights in a structured settlement factoring 
transaction--
            ``(1) described in section 5891(b) and of which the person 
        making the structured settlement payments has actual notice and 
        knowledge, such person shall make such return and furnish such 
        written statement to the acquirer of the structured settlement 
        payment rights as would be applicable under the provisions of 
        section 6041 (except as provided in subsection (c) of this 
        section), or
            ``(2) subject to tax under section 5891(a) and of which the 
        person making the structured settlement payments has actual 
        notice and knowledge, such person shall make such return and 
        furnish such written statement to the acquirer of the 
        structured settlement payment rights at such time, and in such 
        manner and form, as the Secretary shall by regulations 
        prescribe.
    ``(b) Coordination With Other Provisions.--The provisions of this 
section shall apply in lieu of any other provisions of this part to 
establish the reporting obligations of the person making the structured 
settlement payments in the event of a structured settlement factoring 
transaction. The provisions of section 3405 regarding withholding shall 
not apply to the person making the structured settlement payments in 
the event of a structured settlement factoring transaction.
    ``(c) Definition.--For purposes of this section, the term `acquirer 
of the structured settlement payment rights' shall include any person 
described in section 7701(a)(1).''
    (c) Clerical Amendments.--
            (1) 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.''

            (2) The table of sections for subpart B of part III of 
        subchapter A of chapter 61 of such Code is amended by adding at 
        the end the following new item:

                              ``Sec. 6050T. Reporting requirements 
                                        regarding structured settlement 
                                        factoring transactions.''

    (d) Effective Date.--The amendments made by this section shall 
apply to structured settlement factoring transactions (as defined in 
section 5891(c)(3) of the Internal Revenue Code of 1986) occurring 
after the date of enactment of this Act.