H.R.2884
Victims of Terrorism Tax Relief Act of 2001 (Engrossed Amendment as
Agreed to by House)
`CHAPTER 55--STRUCTURED SETTLEMENT FACTORING
TRANSACTIONS
`Sec. 5891. Structured settlement factoring transactions.
`SEC. 5891.
STRUCTURED SETTLEMENT FACTORING TRANSACTIONS.
`(a) IMPOSITION OF TAX- There
is hereby imposed on any person who acquires directly or indirectly structured
settlement payment rights in a structured settlement 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 TRANSACTIONS-
`(1)
IN GENERAL- 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 approved in advance in a qualified order.
`(2)
QUALIFIED ORDER- For purposes of this section, the term `qualified order' means
a final order, judgment, or decree which--
`(A)
finds that the transfer described in paragraph (1)--
`(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 payee, taking into account the welfare and
support of the payee's dependents, and
`(B)
is issued--
`(i) under the authority of an applicable State
statute by an applicable State court, or
`(ii)
by the responsible administrative authority (if any) which has exclusive
jurisdiction over the underlying action or proceeding which was resolved by
means of the structured settlement.
`(3) APPLICABLE STATE STATUTE-
For purposes of this section, the term `applicable State statute' means a
statute providing for the entry of an order, judgment, or decree described in
paragraph (2)(A) which is enacted by--
`(A)
the State in which the payee of the structured settlement is domiciled, or
`(B) if there is no statute
described in subparagraph (A), the State in which either the party to the
structured settlement (including an assignee under a qualified assignment under
section 130) or the person issuing the funding asset for the structured
settlement is domiciled or has its principal place of business.
`(4)
APPLICABLE
`(A)
IN GENERAL- The term `applicable State court' means, with respect to any
applicable State statute, a court of the State which enacted such statute.
`(B)
SPECIAL RULE- In the case of an applicable State statute described in paragraph
(3)(B), such term also includes a court of the State in which the payee of the
structured settlement is domiciled.
`(5)
QUALIFIED ORDER DISPOSITIVE- A qualified order shall be treated as dispositive for purposes of the exception under this
subsection.
`(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 payment of compensation under any workers'
compensation law 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 subparagraphs
(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 person who has assumed the liability for such periodic payments under a qualified
assignment 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 transfer of structured
settlement payment rights (including portions of structured settlement
payments) made for consideration by means of sale, assignment, pledge, or other
form of encumbrance or alienation for consideration.
`(B)
EXCEPTION- Such term shall not include--
`(i) the creation or perfection of a security
interest in structured settlement payment rights under a blanket security
agreement entered into with an insured depository 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 structured settlement payment rights acquired in a
structured settlement factoring transaction.
`(4)
FACTORING DISCOUNT- The term `factoring discount' means an amount equal to the
excess of--
`(A)
the aggregate undiscounted amount of structured settlement payments being
acquired in the structured settlement factoring transaction, over
`(B)
the total amount actually paid by the acquirer to the person from whom such
structured settlement payments are acquired.
`(5) RESPONSIBLE
ADMINISTRATIVE AUTHORITY- The term `responsible administrative authority' means
the administrative authority which had jurisdiction over the underlying action
or proceeding which was resolved by means of the structured settlement.
`(6)
STATE- The term `State' includes the
`(d)
COORDINATION WITH OTHER PROVISIONS-
`(1) IN GENERAL- If the
applicable requirements of sections 72, 104(a)(1), 104(a)(2), 130, and 461(h)
were satisfied at the time the structured settlement involving structured
settlement payment rights 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 provisions 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 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 settlement factoring transactions (as defined in section 5891(c) of
such Code (as so added)) entered 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 structured
settlement factoring transactions (as defined in section 5891(c) of such Code
(as so added)) entered into on or after such 30th day.
(3) TRANSITION RULE- In the
case of a structured settlement factoring transaction entered into during the
period beginning on the 30th day following the date of the enactment of this
Act and ending on
(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 factoring
transaction is ineffective unless the transaction has been approved by an
order, judgment, or decree of a court (or where applicable, 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 structured 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
transferred, 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 required under the
terms of the structured settlement factoring transaction to be paid by the
structured settlement payee or deducted from the proceeds of such transaction.