I
107TH CONGRESS
1ST SESSION
H. R. 1514
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
APRIL 4, 2001
Mr. SHAW (for himself, Mr. STARK, Mr. RAMSTAD, Mr. NEAL of Massachu-
setts, Ms. DUNN, Mr. COYNE, Mr. ENGLISH, Mr. MATSUI, Mr. LEWIS of
Georgia, Mrs. JOHNSON of Connecticut, Mr. KLECZKA, Mr. HOUGHTON,
Mr. LEVIN, Mr. HAYWORTH, Mr. BECERRA, Mr. WATKINS, Mr.
MCDERMOTT, Mr. BRADY of Texas, Mr. CARDIN, Mr. POMEROY, and
Mrs. THURMAN) 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 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.
This Act may be cited as the ‘‘Structured Settlement
Protection Act’’.
SEC. 2. IMPOSITION OF EXCISE TAX ON PERSONS WHO AC-
QUIRE 
STRUCTURED 
SETTLEMENT 
PAY-
MENTS IN FACTORING TRANSACTIONS.
(a) IN GENERAL.—Subtitle E of the Internal Rev-
enue 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 TRANS-
ACTIONS.
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed
on any person who acquires directly or indirectly struc-
tured settlement payment rights in a structured settle-
ment 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 TRANS-
ACTIONS.—
‘‘(1) IN GENERAL.—The tax under subsection
(a) shall not apply in the case of a structured settle-
ment factoring transaction in which the transfer of
structured settlement payment rights is approved in
advance in a qualified order.
‘‘(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 pay-
ment of compensation under any workers’
compensation act 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 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.—
‘‘(A) IN GENERAL.—The term ‘structured
settlement factoring transaction’ means a trans-
fer of structured settlement payment rights (in-
cluding portions of structured settlement pay-
ments) made for consideration by means of
sale, assignment, pledge, or other form of en-
cumbrance or alienation for consideration.
‘‘(B) EXCEPTION.—Such term shall not
include—
‘‘(i) the creation or perfection of a se-
curity interest in structured settlement
payment rights under a blanket security
agreement entered into with an insured de-
pository 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 struc-
tured settlement payment rights acquired
in a structured settlement factoring trans-
action.
‘‘(4) FACTORING
DISCOUNT.—The term ‘fac-
toring discount’ means an amount equal to the ex-
cess of—
‘‘(A) the aggregate undiscounted amount
of structured settlement payments being ac-
quired in the structured settlement factoring
transaction, over
‘‘(B) the total amount actually paid by the
acquirer to the person from whom such struc-
tured settlement payments are acquired.
‘‘(5) RESPONSIBLE ADMINISTRATIVE AUTHOR-
ITY.—The term ‘responsible administrative author-
ity’ means the administrative authority which had
jurisdiction over the underlying action or proceeding
which was resolved by means of the structured set-
tlement.
‘‘(6) STATE.—The term ‘State’ includes any
possession of the United States.
‘‘(d) COORDINATION WITH OTHER PROVISIONS.—
‘‘(1) IN GENERAL.—If the applicable require-
ments of sections 72, 104(a) (1) and (2), 130, and
461(h) were satisfied at the time the structured set-
tlement 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 provi-
sions 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.’’.
(b) CLERICAL AMENDMENT.—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.’’.
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section (other than the provisions of section
5891(d) of the Internal Revenue Code of 1986, as
added by this section) shall apply to structured set-
tlement factoring transactions (as defined in section
5891(c) of such Code as adopted by this section) en-
tered into on or after the 30th day following the
date of the enactment of this Act.
(2) CLARIFICATION OF EXISTING LAW.—Section
5891(d) of such Code (as so added) shall apply to
transactions entered into before, on, or after such
30th day.
(3) TRANSITION RULE.—In the case of a struc-
tured settlement factoring transaction entered into
during the period beginning on the 30th day fol-
lowing 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 fac-
toring transaction is ineffective unless the
transaction has been approved by an order,
judgment, or decree of a court (or where appli-
cable, 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 struc-
tured 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 trans-
ferred, 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 re-
quired under the terms of the structured settle-
ment factoring transaction to be paid by the
structured settlement payee or deducted from
the proceeds of such transaction.
Æ