I 

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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. MODIFICATION OF QUALIFIED ORDER RE4 QUIREMENTS FOR APPROVED TRANS5 ACTIONS. 

6 (a) IN GENERAL.—Subparagraph (A) of section 

7 5891(b)(2) of the Internal Revenue Code of 1986 is 

8 amended by striking ‘‘and’’ at the end of clause (i) and 

9 by adding at the end the following new clause: 


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1 ‘‘(iii) satisfies the requirements of 

2 paragraph (5), and’’. 

3 (b) TRANSACTION REQUIREMENTS.—Subsection (b) 

4 of section 5891 of such Code is amended by redesignating 

5 paragraph (5) as paragraph (6) and by inserting after 

6 paragraph (4) the following new paragraph: 

7 ‘‘(5) TRANSACTION REQUIREMENTS.— 

8 ‘‘(A) IN GENERAL.—A transfer of struc9 tured settlement payment rights shall be treat10 ed as satisfying the requirements of this para11 graph only if the transfer meets the following 

12 requirements: 

13 ‘‘(i) The annual discount rate of the 

14 consideration for the transfer, determined 

15 by taking into account charges, fees, and 

16 other expenses, does not exceed the prime 

17 rate plus 5 percentage points. 

18 ‘‘(ii) The aggregate amount of 

19 charges, fees, and other expenses payable 

20 by the payee do not exceed 2 percent of 

21 the value of the consideration to the payee 

22 (net of such charges, fees, and other ex23 penses). 

24 ‘‘(iii) The payee is not liable for any 

25 penalty, and will not forfeit any amounts 


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1 already paid or incurred, if the transfer 

2 does not satisfy the requirements of this 

3 paragraph. 

4 ‘‘(iv) The transferee has given written 

5 notice of the transferee’s name, address, 

6 and taxpayer identification number to the 

7 annuity issuer and the structured settle8 ment obligor and has filed a copy of such 

9 notice with the State court or responsible 

10 administrative authority issuing the quali11 fied order. 

12 ‘‘(v) The transfer is fair and reason13 able. 

14 ‘‘(vi) Not later than 5 days, and not 

15 earlier than 15 days, before the date on 

16 which the payee first incurs any obligations 

17 with respect to the transfer, the transferee 

18 provides to the payee a disclosure state19 ment which sets forth in a clear and con20 spicuous manner the following: 

21 ‘‘(I) The remaining amounts pay22 able and payment dates under the 

23 structured settlement. 

24 ‘‘(II) The aggregate of such 

25 amounts. 


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1 ‘‘(III) The discounted present 

2 value of the structured settlement 

3 payment rights determined by using a 

4 discount rate equal to the applicable 

5 Federal rate, compounded annually. 

6 ‘‘(IV) A statement of the total 

7 consideration made in exchange for 

8 the structured settlement payment 

9 rights. 

10 ‘‘(V) An itemized list of all 

11 charges, fees, and other expenses pay12 able by the payee, or deductible from 

13 the gross amount otherwise payable to 

14 the payee, with respect to the trans15 fer. 

16 ‘‘(VI) The value of consideration 

17 to the payee net of the charges, fees, 

18 and other expenses described in sub19 clause (V). 

20 ‘‘(VII) The quotient (expressed 

21 as a percentage) of the amount of net 

22 consideration described in subclause 

23 (VI) divided by the discounted present 

24 value of the structured settlement 


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1 payment rights determined under sub2 clause (III). 

3 ‘‘(VIII) The annual discount rate 

4 of the consideration for the transfer 

5 determined by taking into account 

6 charges, fees, and other expenses. 

7 ‘‘(IX) The amount of any pen8 alties (including any liquidated dam9 ages) payable by the payee in the case 

10 of any breach of the transfer agree11 ment by the payee. 

12 ‘‘(B) PRIME RATE.—For purposes of this 

13 paragraph, the term ‘prime rate’ means the 

14 bank prime rate for the first day of the month 

15 in which the transfer agreement is executed, as 

16 published in the Federal Reserve Statistical Re17 lease on selected interest rates (daily or week18 ly), and commonly referred to as the H.15 re19 lease (or any successor publication).’’. 

20 (c) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to structured settlement factoring 

22 transactions (as defined in section 5891 of such Code) en23 tered into later than 180 days after the date of the enact24 ment of this Act. 

Æ 


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