I
106TH CONGRESS
1ST SESSION
H. R. 263
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
JANUARY 6, 1999
Mr. SHAW (for himself, Mr. STARK, Mrs. JOHNSON of Connecticut, Mr. MAT-
SUI, Mr. LEVIN, Mr. SKEEN, Mr. LEWIS of Georgia, Mr. KLECZKA, Mr.
HAYWORTH, Mr. HOUGHTON, and Mrs. THURMAN) introduced the follow-
ing 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; 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 AC-
QUIRE 
STRUCTURED 
SETTLEMENT 
PAY-
MENTS IN FACTORING TRANSACTIONS.
(a) IN GENERAL.—Subtitle E of the Internal Reve-
nue 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 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
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—
‘‘(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
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
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.’’
(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 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
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).’’
(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 settle-
ment 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 Inter-
nal Revenue Code of 1986) occurring after the date of
enactment of this Act.
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