I 113th CONGRESS 2d Session H. R. 3897 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. Modification of qualified order requirements for approved transactions (a) In general Subparagraph (A) of section 5891(b)(2) of the Internal Revenue Code of 1986 is amended by striking and at the end of clause (i) and by adding at the end the following new clause: (iii) satisfies the requirements of paragraph (5), and . (b) Transaction requirements Subsection (b) of section 5891 of such Code is amended by redesignating paragraph (5) as paragraph (6) and by inserting after paragraph (4) the following new paragraph: (5) Transaction requirements (A) In general A transfer of structured settlement payment rights shall be treated as satisfying the requirements of this paragraph only if the transfer meets the following requirements: (i) The annual discount rate of the consideration for the transfer, determined by taking into account charges, fees, and other expenses, does not exceed the prime rate plus 5 percentage points. (ii) The aggregate amount of charges, fees, and other expenses payable by the payee do not exceed 2 percent of the value of the consideration to the payee (net of such charges, fees, and other expenses). (iii) The payee is not liable for any penalty, and will not forfeit any amounts already paid or incurred, if the transfer does not satisfy the requirements of this paragraph. (iv) The transferee has given written notice of the transferee’s name, address, and taxpayer identification number to the annuity issuer and the structured settlement obligor and has filed a copy of such notice with the State court or responsible administrative authority issuing the qualified order. (v) The transfer is fair and reasonable. (vi) Not later than 5 days, and not earlier than 15 days, before the date on which the payee first incurs any obligations with respect to the transfer, the transferee provides to the payee a disclosure statement which sets forth in a clear and conspicuous manner the following: (I) The remaining amounts payable and payment dates under the structured settlement. (II) The aggregate of such amounts. (III) The discounted present value of the structured settlement payment rights determined by using a discount rate equal to the applicable Federal rate, compounded annually. (IV) A statement of the total consideration made in exchange for the structured settlement payment rights. (V) An itemized list of all charges, fees, and other expenses payable by the payee, or deductible from the gross amount otherwise payable to the payee, with respect to the transfer. (VI) The value of consideration to the payee net of the charges, fees, and other expenses described in subclause (V). (VII) The quotient (expressed as a percentage) of the amount of net consideration described in subclause (VI) divided by the discounted present value of the structured settlement payment rights determined under subclause (III). (VIII) The annual discount rate of the consideration for the transfer determined by taking into account charges, fees, and other expenses. (IX) The amount of any penalties (including any liquidated damages) payable by the payee in the case of any breach of the transfer agreement by the payee. (B) Prime rate For purposes of this paragraph, the term prime rate means the bank prime rate for the first day of the month in which the transfer agreement is executed, as published in the Federal Reserve Statistical Release on selected interest rates (daily or weekly), and commonly referred to as the H.15 release (or any successor publication). . (c) Effective date The amendments made by this section shall apply to structured settlement factoring transactions (as defined in section 5891 of such Code) entered into later than 180 days after the date of the enactment of this Act.