I
105TH CONGRESS
2D SESSION
H. R. 4314
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
JULY 23, 1998
Mr. SHAW (for himself, Mr. STARK, Mrs. JOHNSON of Connecticut, Mr. MAT-
SUI, Mr. RAMSTAD, Mrs. KENNELLY of Connecticut, Mr. HAYWORTH,
Mr. LEVIN, Mr. WELLER, Mr. MCDERMOTT, Mr. SKEEN, Mr. KLECZKA,
Mr. PORTMAN, Mr. LEWIS of Georgia, Mrs. THURMAN, Mr. CARDIN, and
Mr. NEAL of Massachusetts) introduced the following bill; which was re-
ferred 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 settle-
ment payments in factoring transactions, and for other
purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE.—This Act may be cited as The
‘‘Structured Settlement Protection Act’’.
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(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
SEC. 2. IMPOSITION OF EXCISE TAX ON PERSONS WHO AC-
QUIRE 
STRUCTURED 
SETTLEMENT 
PAY-
MENTS IN FACTORING TRANSACTIONS.
Subtitle E is amended by adding at the end thereof
the following new chapter:
‘‘CHAPTER 55—STRUCTURED
SETTLEMENT FACTORING TRANSACTIONS
‘‘Sec. 5891. Structured settlement factoring transactions.
‘‘SEC. 5891. STRUCTURED SETTLEMENT FACTORING TRANS-
ACTIONS.
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed
on any person who acquires directly of indirectly struc-
tured settlement payment rights in a structured settle-
ment 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
HARD-
SHIP.—The tax under subsection (a) shall not apply in
the case of a structured settlement factoring transaction
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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 ap-
propriate.
‘‘(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 pay-
ment 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—
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‘‘(i) of the character described in sub-
paragraphs 
(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 per-
son who has assumed the liability for such
periodic payments under a qualified assign-
ment 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 consider-
ation by means of sale, assignment, pledge, or other
form of encumbrance or alienation for consideration.
‘‘(4) FACTORING DISCOUNT.—The term ‘factor-
ing discount’ means amount equal to the excess of
(i) the aggregate undiscounted amount of structured
settlement payments being acquired in the struc-
tured settlement factoring transaction, over (ii) the
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total amount actually paid by the acquirer to the
person from whom such structured settlement pay-
ments are acquired.
‘‘(5) RELEVANT
COURT
OR
ADMINISTRATIVE
AUTHORITY.—The term ‘relevant court or adminis-
trative 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 settle-
ment, or
‘‘(B) in the event that no action or pro-
ceeding was brought, a court (or where applica-
ble, the administrative authority) which—
‘‘(i) would have had jurisdiction over
the claim that is the subject of the struc-
tured settlement, or
‘‘(ii) has jurisdiction by reason of the
residence of the structured settlement re-
cipient.
‘‘(d) COORDINATION WITH OTHER PROVISIONS.—
‘‘(1) IN GENERAL.—In any case where the ap-
plicable requirements of sections 72, 130, and
461(h) were satisfied at the time the structured set-
tlement was entered into, the subsequent occurrence
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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 author-
ized to prescribe such regulations as may be nec-
essary to clarify the treatment in the event of a
structured 
settlement 
factoring 
transaction 
of
amounts received by the structured settlement recip-
ient.’’
SEC. 3. TAX INFORMATION REPORTING OBLIGATIONS.
Subpart B of part III, subchapter A of chapter 61
of subtitle F is amended by adding at the end thereof 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 set-
tlement factoring transaction—
‘‘(1) described in section 5891(b) and of which
the person making the structured settlement pay-
ments has actual notice and knowledge, such person
shall make such return and furnish such written
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statement to the acquirer of the structured settle-
ment 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 settle-
ment payments has actual notice and knowledge,
such person shall make such return and furnish
such written statement to the acquirer of the struc-
tured 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 obli-
gations 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 struc-
tured 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).’’
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SEC. 4. EFFECTIVE DATE.
The amendments made by sections 1, 2, and 3 of this
Act shall be effective with respect to structured settlement
factoring transactions (as defined in section 5891(c)(3) of
the 1986 Code) occurring after the date of enactment of
this Act.
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